Proceedings of the Standing Senate Committee on
National Finance
Issue 9 - Evidence - April 9, 2014
OTTAWA, Wednesday, April 9, 2014
The Standing Senate Committee on National Finance, to which was referred Bill C-462, An Act restricting the fees charged by promoters of the disability tax credit and making consequential amendments to the Tax Court of Canada Act, met this day at 6:47 p.m. to give clause-by-clause consideration to the bill; and to examine the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I would like all honourable senators here this evening to deal first of all with Bill C-462. It is my understanding that it is agreed that we would proceed with clause-by-clause consideration of that bill at this time.
Honourable senators, if at any time in the process it's not clear where we are and what we're doing or what vote I'm calling for, then please stop the process. Interrupt me, and we'll make sure that everybody understands the process that we're doing. What we will be doing is going through each of the clauses one by one to see if you agree with them or if there should be any amendments. At the end, I'll be asking if there are any observations. If there is the need to vote, then we will have the clerk call out those who are here and are entitled to vote at this particular meeting. I think the other rules I will not read but, in the event that an issue arises during this clause by clause, then we can deal with those particular rules that will be applicable.
I want to tell you that there is a letter and a schedule from the Canadian Medical Association, and that's being translated. It will be sent to you so that you all have a copy of it in due course. It only came in one official language. That's the same for the National Benefit. This was Mr. Medjuck who came before us. He sent another letter analyzing the evidence of Mr. McCauley from the Canada Revenue Agency. That is being translated and will be circulated to you as well. That will round out the record, along with the hearings that we did have.
It is agreed, honourable senators, that we proceed with clause-by-clause consideration of Bill C-462, An Act restricting the fees charged by promoters of the disability tax credit and making consequential amendments to the Tax Court of Canada Act?
Hon. Senators: Agreed.
The Chair: Agreed. Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 1, which contains the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: That's carried. Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Agreed. Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 7 carry?
Hon. Senators: Agreed.
The Chair: Carried. If at any time you wish to have "on division," please let me know. Otherwise I'll just say "carried."
Shall clause 8 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 9 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 10 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 11 carry?
Hon. Senators: Agreed.
The Chair: Carried.
[Translation]
Shall clause 12 carry?
Hon. Senators: Agreed.
The Chair: Carried.
[English]
Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the bill carry?
Hon. Senators: Agreed.
The Chair: The bill is carried.
Honourable senators, I would now like to ask you, does the committee wish to discuss appending any observations to its report?
Senator Buth: Senators, I have some observations that I would like appended to the report. I think they have been distributed, but I would like to make some changes. I would like to read the observations.
Observations to the eighth report of the Standing Senate Committee on National Finance, Bill C-462.
While the committee is reporting Bill C-462 without amendment, it wishes to observe that, after several meetings with various stakeholders, issues were raised that should be addressed in the regulatory consultation period following the bill's passage.
The committee recommends that, during the regulatory consultation period, the following issues be considered:
Review of the Disability Tax Credit form to simplify it and consider its availability.
The Chair: That's where the first change is?
Senator Buth: The first change is so that it's consistent with the French.
The Chair: Okay.
Senator Hervieux-Payette: I will look at my English side.
Senator Buth: I will read that again.
Review of the Disability Tax Credit form to simplify it and consider its online availability.
There is no change to the second point, which is:
Clarify the word "promoter" to more accurately reflect the different groups that fill out the Disability Tax Credit form — for example, medical practitioners, accountants, consultants, et cetera.
The Chair: Do you want to discuss this?
Senator Hervieux-Payette: Yes. Should we do it now?
The Chair: I think so.
Senator Hervieux-Payette: I lost my file, so I don't have it with me. I was under the impression that the medical thing that declares that a person is handicapped was a separate document, and that separate document was something that was essential to start the process, whichever other consultant. The whichever consultant, I would change the word "medical" to "health care." Psychologists, psychiatrists and others can do that, and I think "medical" was narrow.
Senator Buth: So change "medical practitioner" to "health care practitioner."
Senator Hervieux-Payette: Yes. And then I would like you to explain it to me. I thought the accountants and consultants were part of the process, but not the ones making them eligible or declaring them handicapped to start the process. Yes, they will have to supply forms and reports on what their income is and so on, but I was not putting that in the same category.
If you remember, I hated that the professionals, who are all regulated by their profession, could not charge more than the usual fee that is accepted, but consultants, give me the name of a consultant who has a professional fee schedule that is approved and been implemented and regulated.
Senator Buth: The CRA will actually consult with the industry to determine the maximum fees to be set for a promoter, so the concern that is raised here is that some of the groups didn't want to be called "promoter." This is to clarify the word "promoter" to more accurately reflect the different groups that fill out the form, which is the definition of "promoter." Those are just given as examples. The consultation period would differentiate between health care practitioners, accountants and consultants. We did talk about the fact that the people who are helping them fill out the forms should likely be more accurately referred to as "consultants."
Senator Hervieux-Payette: I agree with that. I'm saying that health care practitioners are regulated by their different professions, and for consultants, I have some doubts that these are people with any kind of background. I don't think they have a fee schedule or an enforcing mechanism.
Senator Buth: But the regulatory process will set the maximum fee they can charge. That's the purpose of the bill.
Senator Hervieux-Payette: They're not in the same category. I feel the consultants would be the promoters.
Senator Buth: Yes, they are.
Senator Hervieux-Payette: While the other ones are not.
Senator Buth: They are under the definition we've just passed. So that's why this is saying that, during the consultation period, this must be reviewed.
Senator Hervieux-Payette: Could you add lawyers, then?
Senator Buth: Sure. That's why "et cetera" is there.
Senator Hervieux-Payette: I don't want to be "et cetera."
The Chair: As a lawyer, do you mind if "et cetera" follows you?
Senator Hervieux-Payette: I want lawyers before the consultants.
These are the people who are sometimes the legal advisers of the handicapped persons.
Senator Eaton: Just to make it difficult on this issue.
The Chair: Senator Seth, are you on this issue? Senator Eggleton, is it this issue?
Senator Eggleton: I'm more general.
Senator Eaton: They're two things, because a health care provider — consultant — I take the form; I want a disability tax. I have to go and get an affirmation from a health care person that I'm, in fact, disabled, and then an accountant fills it out — or a consultant. It's a two-part process. The health-care worker doesn't necessarily fill out the tax form; they just give a medical certificate saying you're disabled.
The Chair: No, it's right in the form.
Senator Eaton: They fill out the form?
Senator Buth: Yes.
Senator Eaton: And that final form can go to CRA?
Senator Buth: Yes.
Senator Hervieux-Payette: And you have to understand: This isn't medical information, so this is not shared with the other people; it's a separate thing.
Senator Eaton: It goes to two different people.
Senator Buth: The consultant is helping the claimant fill out the form, which includes two parts: One is the basic information, and the other is the medical part. But only a health care practitioner can fill out the second part.
Senator Seth: When these forms come — because I have filled out a lot of forms, so I'm giving you my — as a witness, as a doctor.
We do not come into "promoter," as a definition. We give only information as a practitioner. You came to me, you asked, and you're disabled. I filled out your form. You have filled out whatever your accountant did. We have nothing to do with that.
Senator Hervieux-Payette: Are you an "et cetera"?
The Chair: Senator Hervieux-Payette, we are in a public meeting. If we can't reach a settlement on this issue fairly quickly, I think we should go in camera. Do you want to go in camera?
Senator Hervieux-Payette: No.
The Chair: Is the "no" to the first or second question?
Senator Hervieux-Payette: We should remain in public. We're just trying to clarify some terms.
The Chair: Let's be orderly. Senator Seth has the floor, and it's not for anyone to ask her questions while she's speaking.
Senator Seth: If the form comes to me and the patient asks me to fill it out, I do it as a practitioner and only fill out the items given, which is for me a patient's disease, medication — whatever it is — and we are signing. We're not having anything to do with a promoter. We're not encouraging the patient, "You must write this." There is nothing we charge the fees for. Only a practitioner charges the fees for filling out the form, and we don't have this regulated by government — especially this form, unless something else comes.
Yes, if there are fixed fees. If we don't have fixed fees, some doctors charge less — that we get from the OMA, Ontario Medical Association. Some suggest what we should be charging, and that's what we charge. We don't have any promotional part here.
Senator Buth: I just want to clarify that under the act we have just gone through clause by clause, if the medical practitioner charges a fee in respect to a Disability Tax Credit request, then they are included as a promoter under this act. We did have some discussion about the fact that the health care practitioners do not like the term "promoter," but they will fall under this act because that's the definition.
The Chair: Order please, Senator Seth. I'll put you on the list.
Senator Buth: Senator Seth, under this act, "promoter" is now defined. It essentially means "a person who directly or indirectly accepts or charges a fee in respect of a disability tax request."
We're attaching these observations because those witnesses expressed concerns that they don't want to be called a promoter. Canada Revenue Agency explained that they would not necessarily use that term in terms of any of the information that was going out. We are encouraging CRA, through these observations, to ensure that they clarify the word "promoter" to accurately reflect the different groups that fill out the form.
Senator Seth: I was trying to add the following: "The person does not include a health care practitioner duly licensed under the applicable regulatory authority who provides health care and treatment."
The Chair: Are you proposing an amendment to the bill? We've already passed the bill.
Senator Seth: Just this thing to be added.
The Chair: To the observations?
Senator Seth: Yes, to observations.
Senator Buth: We can't redefine the word "promoter" in our observations; it's already defined in the bill. We're saying to clarify the word "promoter" to more accurately reflect the different groups that fill out the disability tax form. We can't change the definition of "promoter" in the observations.
If you want to change the observation to more clearly define "health care practitioner" — but you can't really remove it from the term "promoter."
The Chair: Because it's already in the legislation.
Senator Buth: It's already passed.
The Chair: I agree with Senator Buth.
Senator Seth: Okay, then we go ahead. What else? But we don't like that word "promoter" for practitioners.
The Chair: A number of witnesses didn't like that word. We heard that from a number of witnesses.
Senator Buth, you were at bullet No. 2, and we had concluded that one, had we?
Senator Buth: Bullet No. 3: Review the service level and the promotion of the credit by the Canada Revenue Agency to increase awareness and reduce the difficulty of applying for the credit.
Bullet No. 4: Discuss with industry the potential of developing a code of practice to improve the level of service and set standards for certain items, such as advertising.
The Chair: No change, then?
Senator Buth: No changes to those two. The last bullet has some changes. It should be "ensure" rather than "ensures": "Ensure that the interpretation of section 3(c) of the bill is that the" — here are the changes — "that the promoter pays the tax credit to the claimant."
The Chair: Doesn't the tax credit come from the Government of Canada?
Senator Buth: Subsection 3(c) is where they're paying back — is repaid to the claimant, right.
Senator Callbeck: It's in the act?
Senator Buth: We had some discussions under promoter's fee, subsection 3(c) —
Senator Callbeck: Under (c).
Senator Buth: Yes. Under 3.2, it's the contravention. We had to clarify with CRA that the promoter actually repays the fee to the claimant. Essentially, if they don't do that, then they get fined. We had to ask CRA to clarify that was their interpretation.
They came back and said yes, that's their interpretation, but under this observation we wanted to ensure that's what they said and that's what they would do.
The Chair: This is the Disability Tax Credit and that too much has gone to the promoter, according to this act. The payment coming from the promoter is the over payment that should be paid back because the initial refund would go to the disabled person.
Senator Buth: Right, and then if they contravene the fee and they have charged too much, then what they must do is pay the disabled person back. That wasn't that clear in section 3(c).
The Chair: I understand why the money would be coming.
Senator Hervieux-Payette: Did you read the last paragraph?
Senator Buth: "Ensure that the interpretation of section 3(c)," is that it?
Senator Hervieux-Payette: No, the last, last.
Senator Buth: No; I haven't gotten there.
The Chair: We're still working on the next to last. We are on the penultimate bullet.
Senator Buth: Maybe it should be "repays." Senator Day?
The Chair: I'm sorry. I'm getting a lot of advice here.
Senator Buth: To make it clear, maybe it should be "ensure that the interpretation of section 3(c) of the bill is that the promoter repays the tax credit to the claimant" because it is the repaying.
Senator Eaton: Is that the promoter?
Senator Buth: Yes, "that the promoter repays the tax credit to the claimant."
The Chair: What is being repaid is the overcharged fee. That overcharged fee —
Senator Buth: Right.
The Chair: That was the concern I had earlier, because the tax credit comes to the disabled person. The overcharged fee would do it?
Senator Buth: Yes, "the promoter repays the overcharged fee to the claimant."
The Chair: The other point I would like you to consider is that these A, B and Cs down here, the way I read it, are part of the formula, but there are just two subsections, 3(1) and 3(2).
Senator Buth: It should be 3(2), then. Yes; I agree, 3(2).
The Chair: Agreed; rather than 3(c). That's part of the formula.
Senator Buth: Why don't we say "the overcharged fee (c)," which is the formula?
The Chair: Sure. Does everybody understand that bullet, the final one?
Senator Buth: The last sentence?
The Chair: Last paragraph.
Senator Buth: The committee did not offer any amendments because these issues would be best resolved in the regulatory consultation period.
Senator Hervieux-Payette: I think we are misleading people. A regulatory consultation can only apply to the adopted bill. Actually, if we want to correct "promoter" it could never be done through the regulation; it has to be done through an amendment to the bill. That's why I have some sympathy for Senator Seth, because this is a very important one. It touches a lot of people who are doing that. In fact, regular practitioners don't see a patient when they are filling these forms, they are more administrative people.
We could even propose an amendment to deal with the misinterpretation of "promoter." It could be sent to the house and be adopted before the end of the session. Otherwise, I want to tell you that in five years it might not have been done. To be very clear, the regulation process will just have to apply to the bill that we have adopted, and no clarification will be done on that. That's my comment.
The Chair: I agree with you, but there is the other point that amendments could always be made at third reading.
Senator Buth: That's right.
Senator Hervieux-Payette: Yes. We also have to change that sentence because it gives the impression that once we are consulting for the regulation, which is a process that normally takes place when a bill is passed, it will be resolved. But it won't be resolved.
The Chair: Do we need that final paragraph?
Senator Buth: No, we don't need that final paragraph.
The Chair: We said at the top that we're passing this without amendment.
Senator Hervieux-Payette: I think that I would prefer not to see it.
Senator Buth: I'm fine taking that out.
The Chair: With those changes, then, is it agreed that the Subcommittee on Agenda and Procedure be empowered to approve the final version of the observations so we can see these various amendments that we've agreed to?
I'm terribly sorry; I withdraw my comment. Senator Eggleton.
Senator Eggleton: Again, I'm here as the opposition critic for the bill.
The bill has very limited application. It is essentially the fees that will be charged by promoters, or whatever you want to call them. But I think these observations improve it, because it talks about the simplification of the form and an improvement to the service level provided by CRA. I was impressed with the CRA people when they were here. I think they are going to carry out a good consultation in trying to establish the fees. They responded well to the questions that I and others asked about, the simplification of the form and providing a better service at the beginning so as to cut down on the number of people that need to go to these promoters and pay these very high fees.
I think it's very unfortunate — and here I agree with Senator Seth and Senator Hervieux-Payette — that sponsor of this bill in the House of Commons used the word "promoter." I don't think it's an appropriate word for all of these categories of people, but you have now passed the bill with the word in it. The only option you have now is at third reading in the house to make an amendment to it. That lies ahead, if you wish to go that route.
Failing that, I think what's in here about clarifying the word "promoter" is a good move; better than nothing. It would have been better, as I said, if they hadn't used the word "promoter" in the first place.
The bill, even with these observations, as I say, is very limited. Most adult disabled people will never get any of this — they won't qualify for it — because most of them don't pay enough taxes to be able to get the Disability Tax Credit. What we really need is to make the tax credit refundable.
Four years ago, the Senate unanimously passed a recommendation in the report In From the Margins: A Call to Action on Poverty, Housing and Homelessness, did exactly that; it called for this tax to be made refundable. That would get to far more people and help a far greater number of disabled people.
This is what it is. It is a good step in terms of the fees. Request these additional observations, if it results in a streamlining of the process, which I think the CRA officials that were here seemed committed to doing. Then I think it is a good move.
I support the observations. I just wanted to make that point. Now, there may be attempts to amend on third reading. We'll see how that goes.
Senator Callbeck: I agree. I think the observations do improve the bill, but as I said one or two meetings ago, I have a real problem with that word "promoter." I just don't think it's appropriate at all to have health professionals under that. As you said, it could be amended in the Senate.
I agree with Senator Eggleton about this, namely that it should be a refundable tax credit.
The Chair: Thank you. The analysts from the Library of Parliament are not sure if your comment was a give-away comment or you actually wanted lawyers.
Senator Hervieux-Payette: I'm supporting the comments with my comments.
The Chair: Did you want "lawyers" in there as listed as one of the promoters?
Senator Hervieux-Payette: Okay; let them out.
The Chair: Thank you. I thought that might help.
I was halfway through this request. I won't read it again, but are you in agreement that the amendments will be looked over by steering before we file this in the Senate? Everybody agreed?
Hon. Senators: Agreed.
The Chair: Thank you. Is it agreed that the bill be reported as soon as practicable to the Senate with observations appended thereto?
Hon. Senators: Agreed.
The Chair: Thank you, honourable senators. This particular matter is concluded, and we will report it back as soon as we get it finished.
(The committee suspended.)
[Translation]
(The committee resumed.)
The Chair: Tonight we are going to continue our study of the Main Estimates for the fiscal year ending March 31, 2015.
[English]
We are pleased to welcome a number of officials from Foreign Affairs, Trade and Development Canada. We welcome Nadir Patel, Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology — a busy man, has a lot of things on the go — and Arun Thangaraj, who is the Director General, Financial Resource Planning and Management Bureau.
From Transport Canada we welcome André Lapointe, Assistant Deputy Minister, Corporate Services and Chief Financial Officer; and from the Department of National Defence we welcome Kevin Lindsey, Chief Financial Officer, Rear-Admiral Patrick Finn, Chief of Staff, Material Group and Major-General Ian C. Poulter, Chief of Program.
I understand each of the departments have a spokesperson for introductory remarks. I will start with Foreign Affairs then go to Transport and Department of National Defence.
Nadir Patel, Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology, Foreign Affairs, Trade and Development Canada: Thank you for the invitation to appear before the committee. It is a pleasure to be here again. We last appeared before this committee in mid-February 2014 — about six, seven weeks ago — so I will keep my opening remarks brief, and then I would be pleased to be take your questions.
As mentioned at our last appearance, the new Department of Foreign Affairs, Trade and Development was created in mid-2013 through Royal Assent of Bill C-60. The mandate of the new department, which is outlined in the Department of Foreign Affairs Trade and Development Act, is broad in scope and important for Canada and Canadians.
The department manages diplomatic and consular relations with foreign governments and international organizations, engages international players to advance political and economic interests, improves and maintains market access for Canadian businesses, delivers consular services and travel information to Canadians, supports global peace and stability and leads coordinated Canadian responses to crisis and natural disasters abroad, alleviates global poverty and enhances prosperity and stability in the developing world.
We do all of this and more through a global network of 172 missions in 105 countries abroad, providing a range of services to Canadians and Canadian businesses while also supporting the international work of 26 federal departments and agencies, Crown corporations and provincial governments.
As indicated in our new corporate risk profile, the department — or DFATD as it is affectionately known within the department — continues to face a wide range of risks arising from uncertainty and volatility in the international environment in which it operates, such as natural disasters, conflicts and security threats.
Against this backdrop of complexity and volatility, combined with a broad mandate, fluctuations in foreign currencies, varying rates of inflation abroad and changes in assessed contributions, the department continues to emphasize prudence in financial management, in planning and reporting, and identifying and managing risks in order to deliver its mandate in a sustainable, effective and efficient manner.
These 2014-15 Main Estimates for DFATD, the first which fully reflect the newly created department, are $5.349 billion, a net increase of $3.038 billion in comparison to the previous fiscal year.
This net increase of $3.038 billion is composed of a net increase of $2.736 billion in grants and contributions, vote 10; a net increase of $147 million in operating vote 1; a net decrease of $20.2 million in capital, vote 5; a net decrease of $14.6 million in payments in respect of pensions for employees locally engaged outside of Canada, vote 15; as well as an increase of $189.5 million for statutory items such as contributions to employee benefit plans and payments to international financial institutions.
Overall, the net increase is primarily related to the transfer of a $3.038 billion of appropriations from the former Canadian International Development Agency, CIDA, as a result of Bill C-60 which, as I just mentioned a few minutes ago, formally created the new department.
Other major increases include $120 million for the crisis pool quick release mechanism to allow Canada to respond quickly to major international crisis and disasters involving a multilateral response; as well as $19.3 million for additional costs related to assessed contributions, mainly due to currency fluctuations given that the payment of these contributions is in foreign currency.
Notable funding decreases include $70.4 million resulting from a Budget 2013 decision to transfer the primary responsibility for Passport Canada to Citizenship and Immigration Canada, as well as $52.3 million related to the Budget 2012 spending review.
Looking ahead as we begin fiscal year 2014-15, from a financial management perspective we will continue to manage and closely monitor the successful implementation of the Budget 2012 spending review into the third and final year, and we will continue to leverage the opportunity brought forward by amalgamation of two former departments, implementing the best practices and financial management from those two former departments into one new department.
From a financial management perspective, much work has already been done on amalgamation of processes, structures, systems and resources and these Main Estimates are a tangible example. The department's recently tabled 2014-15 Report on Plans and Priorities and the department's updated corporate risk profile are further examples of progress towards a fully integrated new department.
But more work remains and amalgamation will continue to be a priority. We will continue to harness the talent and energy that two former departments have demonstrated to continue to deliver services and programs effectively and efficiently.
I will conclude by emphasizing that as we look ahead, DFATD remains committed to continuously find ways to better serve Canadian, promote our values and interests, solve global challenges and bring prosperity to Canada and the world.
André Lapointe, Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Transport Canada: Thank you. I will take you briefly through the highlights of our Main Estimates for 2014-15, and I will start by addressing some of the priorities that Transport will be financing with the estimates of $1.65 billion that are being requested.
We will be refining and strengthening Transport Canada's safety and security oversight. We will continue to contribute to the government's responsible resource development agenda. We will improve Canada's competitiveness in critical transportation infrastructure, and we will ensure that Transport Canada's policies, programs and activities will meet the needs of the transportation system in the long term. We will also adopt the Government of Canada's efficiency and renewal measures.
Now, for more detail, $357 million will be dedicated to the safety and security of the travelling public, more specifically, to respond to the recommendations of the OAG 2013 rail oversight report, including accelerated regulatory development and enhancing rail safety's systems-based approach to oversight. We will also augment the inspection regime, resources and capabilities of the transportation of dangerous goods program.
Also requested in the estimates are $1.1 billion that will be directed at improving the efficiency of the transportation system. This includes work to advance the Detroit River International Crossing project. As well, funding will continue to support all levels of government and the private sector in delivering key transportation infrastructure projects, and it will also serve to maintain and operate our remaining airports and ports.
As well, $86 million will be dedicated to support a clean transportation system. This includes further advancing the world class tanker safety system initiatives, such as enhancing the oil pollution liability and compensation regime. We'll continue to develop regulations for the air, marine and rail modes through clean transportation initiatives and provide programs to limit air pollutants and greenhouse gas emissions from transportation modes. We will also implement the Modernized Navigation Protection Act and manage and clean up the department's contaminated sites.
Also, there is $151 million for internal services to ensure that the department's programs and other corporate obligations are appropriately supported.
Now, the $1.65 billion is an increase over last year's estimates by $143.7 million. Some of the new authorities are focused on world class tanker initiatives and the extension of the remote passenger rail program. The bulk of it is a re-allocation from previous years to better match the funding with expenditure requirements.
That concludes my remarks.
The Chair: I wonder if you could explain that statement. "Better match funding with expenditure requirements" doesn't help us a lot.
Mr. Lapointe: Essentially, we have a series of infrastructure funds that have projects that have been approved and funding that was available in 2013-14. That unfortunately was not expended by our partners, for all sorts of reasons, so that is re-profiled to the following year or subsequent years.
The Chair: We have an expert on re-profiling. Thank you, Mr. Lapointe.
Mr. Lindsey, please.
Kevin Lindsey, Chief Financial Officer, National Defence and the Canadian Armed Forces: Thank you very much, Mr. Chair and senators, for the invitation to present DND's Main Estimates for 2014-15.
Mr. Chair, I'm fighting a bit of a cold, so if I'm a bit difficult to understand tonight, please let me apologize in advance.
[Translation]
I will be brief. I am accompanied today by Rear-Admiral Patrick Finn, Chief of Staff to the Assistant Deputy Minister (Materiel), and by Major-General Ian C. Poulter, Chief of Program, Vice-Chief of Defence Staff.
[English]
Turning to the estimates, I'd like to take a few moments to highlight some key points for the committee.
On page 199 in the English version and page 186 in the French version, you will note that the National Defence 2014-15 Main Estimates are $18.7 billion, a net increase in authorities of approximately $676 million or 4 per cent over the 2013-14 Estimates.
[Translation]
As highlighted on page 200 of the English version, and page 187 of the French, these Main Estimates contain a number of changes that reflect the current planning context and the major factors contributing to the net increase in authorities, including a net increase of $1,171 million in our capital vote for the net adjustments to the spending profile of major projects so financial resources are aligned with current project acquisition timelines allowing the department to deliver key capabilities such as the Family of Land Combat Vehicles, the Arctic/Offshore Patrol Ships, and Maritime Helicopter Project.
[English]
These Main Estimates also include an increase of $347 million associated with the annual escalator on defence spending as announced in Budget 2008, which provides long-term and predictable funding.
These increases are partially offset by decreases in our operating budget related to the final adjustment to fully implement the Budget 2012 Spending Review, $317 million; a decrease of $19.5 million related to the end of the training mission in Afghanistan; a decrease of $128.8 million related to the implementation of measures announced in Budget 2014 to reduce travel expenditures and the transfer of liability for future severance payments to Treasury Board Secretariat; and a transfer to Shared Services Canada of $72 million.
[Translation]
Mr. Chair, the expenditures included in the 2014-15 Main Estimates are necessary to provide the Canadian armed forces with the resources they need to carry out their work on behalf of Canadians.
[English]
I also want to highlight an important change presented on page 201 of the English version and page 188 of the French version. Commencing in 2014-15, National Defence has implemented a new Program Alignment Architecture composed of five programs and two strategic outcomes, plus internal services. While the business of defence remains mostly unchanged, the articulation of that business is fundamentally altered in the new Program Alignment Architecture. The activities associated with the programs were aligned and, in many cases, regrouped in the new PAA. This is why on page 201 of the English version and page 188 of the French version the prior year Main Estimate amounts could not be compared to the new 2014-15 PAA distribution, with the exception of internal services. The scope of internal services in our new Program Alignment Architecture is reduced, as activities directly linked to specific military programs were aligned to the appropriate program. Therefore, the variance of $478 million can be attributed mainly to a redistribution of costs to the appropriate program.
[Translation]
As we move forward in the fiscal year, the department will continue to monitor our fiscal requirements to ensure value for taxpayer dollars.
We will be pleased to listen to the committee's comments and to reply to any questions you may have. Thank you.
[English]
The Chair: Mr. Lindsey, can I assume that this new approach or the Program Alignment Architecture will put the estimates more in line with the priorities that come out roughly at the same time?
Mr. Lindsey: The new PAA, Mr. Chair, greatly simplifies the presentation of our estimates relative to the past, where we had many more strategic outcomes and program activities. In our view, the information is presented in a far more simple way and is far more reflective of the way we actually manage and deliver the business of defence.
The Chair: But the plans and priorities that come out roughly at the same time as these estimate documents that we're looking at today, will we find it easier to compare the two sets of documents and looking at what you're planning over the next year?
Mr. Lindsey: In the report on plans and priorities for DND for 2014-15, there is a table on page 20 which expresses past financial figures according to the new architecture so that you can compare the past with the new framework going forward.
The Chair: That's very helpful, Mr. Lindsey. Thank you for that.
Senator Eaton: Thank you, gentlemen. Mr. Patel, it is nice to see you again. Tell me a bit about the rationalization that happened between trade and development? How well is that focus on bringing these two together working?
Mr. Patel: The amalgamation between the former Canadian International Development Agency and the former Department of Foreign Affairs and International Trade, from our perspective, is working quite well. It was announced in Budget 2013 so we're not quite there a year, but we're about 10 months into becoming an amalgamated department given that it was created at the end of June 2013.
There are three distinct dimensions to this, one on the corporate administrative functions, if you will. It's relatively straightforward because you know you need to bring your budgets, your financial systems and your corporate information systems together, so your end state is fairly straightforward. We found that, as it relates to merging the actual functions, the business of the former CIDA and the former DFAIT were very different although the business lines were similar. What I mean by that is the former CIDA was a programming department with a high grants and contributions vote and the former DFAIT had a small grants and contributions vote and a higher operational vote. There were different talents and functions in the workforce. Bringing them together found a lot of synergy but little in the way of overlap and duplication. It's working very well.
There is still some work ahead of us on the corporate side. Investing in full integration of all of our systems, given that we were on different systems, is taking some additional time. However, that's expected. We have over 130 different initiatives on corporate items, including our program alignment architecture, our RPP and our department performance report. Some of those have been completed; some additional work remains to be done to streamline through amalgamation.
The second element is policy on the programming side. We've introduced an amalgamated organizational structure where you see trade, development, Foreign Affairs and other business lines, whether it's security or corporate functions, working together. For example, with our geographic programs, we now have one branch that is responsible for all of Africa, including trade promotion, investment promotion, development initiatives and other foreign policy programs, working under one assistant deputy minister; and the managers, employees and units are integrated to work together. Abroad, our heads of mission are now accountable for the whole range of programming, whether it's development, trade or foreign affairs, depending on the country, and we're making sure that appropriate training and expertise is brought forward where there may be some gaps as a result of previous business lines not being fully immersed. That work is in the early stages but it's working quite well.
Finally, on the people management side, we're very mindful that an amalgamation of two departments brings forward some anxiety and concerns but we are trying hard to inform and communicate as much as possible. There have not been any major workforce impacts. If anything, there have been opportunities for cross-training and new career development opportunities as well. So far it's going well, but that's going to be an area of ongoing focus for us, because we're mindful of the work we need to do from a human resources perspective to bring together two business lines into one department.
As I said in my opening remarks, as much as amalgamation of two departments brings forward challenges, it is an opportunity to leverage the best from two former departments and to build something new. That's really the mindset we have. We're working with our employees and doing a lot of consultation with our employees and with our bargaining agents, as well as abroad and at headquarters.
Senator Eaton: It is probably fair to say that next year would be a better time to judge from a budget point of view. That's not the only consideration but that would be a fair assessment?
Mr. Patel: I think that would be a fair assessment. From a CFO perspective, bringing two departments together will provide opportunity for some synergies and for leveraging some efficiencies, but it's not going to be something so dramatic because the functions were quite distinctly different. Whatever those deficiencies are, this wasn't meant to be a cutting exercise. That was made clear by our minister and in the budget. However, whatever those efficiencies are will provide an opportunity to optimize or reallocate those resources in line with our priority as a department.
Senator Eaton: Mr. Lindsey, in your remarks, you were talking about the net increase of $1.1 million in our capital vote for the net adjustment spending profile of major capital projects such as the family of land combat vehicles and the Arctic offshore patrol ships. Does that amount have anything to do with the expected delivery or is this just the ongoing costs of development?
Mr. Lindsey: First, senator, I may have misspoken in my remarks. The increase is actually $1.1 billion.
Senator Eaton: I thought so, but then I read "million" and I thought, aren't we getting a lot for nothing.
Mr. Lindsey: Don't we wish.
The Chair: Are we getting a lot?
Senator Eaton: Is this giving us the happy news that some of these are online to be delivered shortly, or is this just ongoing cost?
Mr. Lindsey: I will defer to Rear-Admiral Finn for a complete answer, but I think in its essence this is a good news story. Things are progressing.
Rear-Admiral Patrick Finn, Chief of Staff, Material Group, National Defence and the Canadian Armed Forces: Thank you very much for the question. It is in the projects we listed. For example, in the family of land combat vehicles there are three projects: our tactical armoured patrol vehicles, our force mobility enhancement and the upgrade of our Light Armoured Vehicles, all of which are coming into delivery. In the case of the Light Armoured Vehicles, they are starting to deliver.
The fiscal year that we've just started will be a big year for us to see delivery of many of those vehicles. We also have the Arctic offshore patrol ship. We will be finishing the design this year and will be entering into implementation to start building the Arctic offshore patrol ship next summer.
Senator Eaton: There's "ships" here, plural. How many?
Rear-Admiral Finn: There are ships; yes, there are. What is approved is for six to eight ships. As we go through the design and the production on the first ship, we'll get a better understanding, if you will, of the unit cost. We're working closely in this case with the shipyard on the East Coast, Irving Shipbuilding, to work through the design with them to drive down the cost. We'll find out exactly where we're going to land and the exact number as we build the first ship.
Senator Eaton: So we have happy news, and then part of that $1 billion will be going towards design and ongoing costs for the Arctic ships?
Rear-Admiral Finn: The Arctic patrol ships; yes, they are.
Senator Eaton: When do you expect delivery of those, all going well?
Rear-Admiral Finn: Delivery of the first Arctic offshore patrol ships is in 2018. Also in that list of projects is the Maritime helicopter project, which is one that has been problematic. We have entered into agreement to re-profile it with the supplier Sikorsky. We will start accepting helicopters in the summer of 2015, which will allow us to start retiring the Sea Kings.
Senator Eaton: That's very good news.
The Chair: Regarding land combat vehicles and that family of land vehicles that you've been talking about, we heard about one project that was cancelled a few months ago. Is this the LAVIII that we're talking about here?
Rear-Admiral Finn: Yes, the one that was cancelled a few months ago was the Close Combat Vehicle. It was under this whole thing that we have called a family. It's called that in the sense that there were different vehicles under the aegis of this program. That one was cancelled. What we are talking about here are the Light Armoured Vehicles III, which are being upgraded and will now be called the Light Armoured Vehicle VI. That's the new nomenclature for it.
The Chair: That's inflation for you.
Rear-Admiral Finn: It is. It's quite a different vehicle. It's been substantially redesigned, and we're very impressed with what we've been seeing in testing and delivery. That was part of the motivation to step away from the Close Combat Vehicle.
We've talked previously about another capability: The forced mobility enhancement, which are armoured combat vehicles and recovery vehicles. Those are in delivery. Now we're going to be delivering the implements to work with those vehicles. Those will start to be delivered early next year.
The Tactical Armoured Patrol Vehicle is another one, where we're into detailed testing right now. Later this fiscal year, we anticipate starting to take delivery of the vehicles.
The Chair: Do I have the name Coyote right?
Rear-Admiral Finn: Coyote is a reconnaissance vehicle we're replacing. There is a variant of the armoured vehicle we will be upgrading to replace it. We're trying to find economies of scale, and within the light armoured vehicles, actually use it for multiple purposes such that we have a common platform to try to drive down service support costs.
The Chair: Did I understand that the LAV VI is a new vehicle, or is it a LAV III that's just been reworked?
Rear-Admiral Finn: It is the latter, but it has been substantially reworked — much more protection, much more mobility. It's got a new hull. It's a fairly dramatic upgrade. Our testing to date has proven that it's providing a better capability than we thought we would receive, which was part of our discussion around canceling the close combat vehicles.
[Translation]
Senator Chaput: My first question is for Foreign Affairs, Trade and Development Canada. In your opening statement, when you talked about the future, you raised the matter of the amalgamation of departments. You referred to best management practices, amalgamating processes, structures, et cetera. I would like you to explain to me more in detail what your amalgamation plan is, the steps involved and the costs related to the plan.
[English]
Mr. Patel: I'll build on the answer provided earlier.
In terms of what we would refer to as the "merger plan," if I can use that term, the way we're functioning is we have a small unit dedicated to the planning and the implementation of a range of initiatives related to amalgamating the department. It's headed up by an individual with a small team of folks who are supporting that.
This transition team or amalgamation unit is leading a number of different specific initiatives. As part of those initiatives, we have a change management plan, and that change management plan engages a number of different areas, including human resources, corporate systems, corporate processes and policies. It also gets into the program and policy elements that I alluded to a little bit earlier.
This is not something that would be done in a very short period of time. It's seen to be a multi-year initiative. Some elements of that can be done very quickly and have already been completed — and I'd referred to a few examples — but some elements of that will take quite a bit of time. When you have two departments and their workforces and different occupational groups, bargaining agents, assignments processes and types of staffing processes, bringing them together is going to take a little bit of time.
We have our assistant deputy minister responsible for human resources working on all the different facets of human resources: It could be the occupational group structure; it could be training and learning needed to cross-develop employees; et cetera. That was incorporated into our change management plan.
I already mentioned this and I won't repeat some of the specifics, but on the corporate side, we have over 130 different initiatives that deal with planning, reporting, accounting, financial policy and financial systems. For example, if you have two departments that have their own financial policies that come from or conform to Treasury Board policies where there is an opportunity to bring these together, we either have done it or will do it. The same on human resources — all these corporate elements.
It is the same idea with corporate systems. There is a lot of work to do continuing on with the amalgamation of systems.
We have an external advisory group, as well, made up of individuals from outside of the department and government. They are providing advice to our deputy ministers in terms of best practices for mergers and some of the things we should consider. That external advisory group meets once every couple of months and provides advice to the deputy minister. So there's some expertise from outside, as well.
The final thing I will mention that is noteworthy is that when I talk about best practices, I talk about the capacity or expertise in one former department. We found some areas where it was what I would refer to as an area of improvement in the other department and vice versa. So this is great, because it allows us then to see what one department was doing really well. Financial management is a good example of that. When we talk about grants and contributions, administration and the fiduciary risk assessments done on every dollar that goes out the door on the former CIDA side, we can incorporate that into the rest of the department. It brings greater rigour and a much more robust management framework. That's just one example, and there are many others like that.
Bringing this all together, we have what we internally refer to as governance committees. We have a policy committee, a programs committee, a resource management committee and a corporate management committee. Those committees are overseeing implementation of these pieces to the overall change management plan.
In terms of how much it's costing or how much it's saving, it's too early to tell. Right now it is early days. We're tracking any one-time costs. For example, if you need to implement systems changes, these are one-time costs and we'll track and provide for those with some financial flexibility we're building up in the department.
Then it will take time to determine what any ongoing costs are. And the savings, as I mention earlier — it's not a cuts exercise, but there will be some efficiencies, and we would like to use those efficiencies and redirect them to areas where that could cost us in terms of improving or moving ahead.
[Translation]
Senator Chaput: That is a very good answer and I thank you. Is the staff that is already there doing that work with the committees, or did you have to hire more people?
[English]
Mr. Patel: It's people in the department now. We haven't hired externally to do this kind of work. These governance committees are made up of directors general and assistant deputy ministers. We have a departmental consultative group made up of employees from all different levels in the department and missions.
But all of this work, including the amalgamation unit, is all employees from within the department.
[Translation]
Senator Chaput: I have a question for National Defence. In your statement you talked about a transfer to Shared Services Canada of $72 million. In our committee, we hear a lot about transfers to Shared Services Canada. I would like you to explain to us whether National Defence services will now be offered by Shared Services Canada, on your behalf? How will that work between National Defence and Shared Services Canada? Will there be a transfer of services, since there is a transfer of funds?
Mr. Lindsey: That transfer is part of the evolution of the creation of Shared Services Canada. The business model involving National Defence and Shared Services Canada is similar, as well as that of Shared Services Canada with the other departments and agencies.
[English]
As part of that evolution, Shared Services Canada is assuming responsibility for the support of end-user devices. So National Defence is transferring money that we would have used to provide that support ourselves to Shared Services Canada, which will provide that service in the future.
[Translation]
Mr. Lindsey: That is a part of those transfers. Another part is that —
[English]
Shared Services Canada will be responsible for installing the technology backbone in the new National Defence headquarters at the Carling campus. So we are transferring approximately $27.9 million in 2014-15 to Shared Services Canada to support that work.
Senator Chaput: Will this new technology be bought by Shared Services Canada, or will you be buying the technology or whatever it is and then Shared Services Canada will install it? How does it work? In some other departments the equipment is bought, then delivered and installed in the department. How will it be working for you?
Mr. Lindsey: Senator, Defence will pay for the equipment. As to who actually issues the contract and does the financial exchange, I am uncertain whether it is Defence or Shared Services Canada, but I believe it is Shared Services Canada.
Senator Chaput: Once it's installed, there is a contract. If there are problems, who will be responsible for taking care of them? This has to be cleared before —
Mr. Lindsey: As part of the business model, Shared Services Canada will be responsible for providing the service and support. They will be the people we call when we need help, for those services that we transfer to them.
Senator Chaput: Thank you. I will be asking the same question next year if I'm still around.
Mr. Lindsey: Thank you for the warning.
The Chair: You'll still be here. I'll go first to the deputy chair of the committee, Senator Buth — sorry, Senator Smith.
Senator Buth: Thank you for the raise.
Senator L. Smith: Is there something you're trying to tell me?
[Translation]
I have a question for Mr. Lapointe.
[English]
I saw you sitting there looking very lonely. You must be feeling neglected.
[Translation]
You mentioned priorities in your statement.
[English]
I am looking at the notes I took and then at the book, and I see some of the highlighted lines in terms of expenditures, but I just wondered if you could summarize this.
[Translation]
Can you give us an overview of the three most important priorities?
Mr. Lapointe: First, I would certainly mention strengthening our security and safety surveillance capacity.
Senator L. Smith: Would that be your first priority?
Mr. Lapointe: Yes.
Senator L. Smith: Can you give us some more details on that?
Mr. Lapointe: The main task regarding transportation consists precisely in carrying out surveillance of all modes: air, water, rail, and the transport of dangerous goods.
Following the tragic events that occurred last summer in Lac-Mégantic, we took a step back to see if certain things needed to be adjusted in our system, that is to say whether certain regulations needed to be amended immediately. And that is what we did.
That, however, is a continuous process. For instance, in the area of aviation, we have to ensure that we are aligned with international practices. The same thing is true on the marine side. These are systems that are always evolving and we have to adapt our rules so as to make sure that we are consistent with what is happening, for instance, in the United States.
Internally, this also means that we have to ensure that our inspection staff understands the changes well, and that the inspectors are in a position to apply them and receive the appropriate training to put all of that into effect.
[English]
Senator L. Smith: The highest profile incident was Lac-Mégantic — some of your tanker spills — in terms of rail. If you looked at that particular focus of improving security, would transportation in the rail sector be number one in that area because of the profile and the carnage that took place?
Mr. Lapointe: I have to tell you that in the last year we've put a great deal of focus on the rail side, and that is continuing. We are getting advice from different sources on how to best improve. We are working closely with the U.S. on tanker cars, for instance. We are putting a great deal of focus —
Senator L. Smith: Has there been a firm policy or move taken that will give immediate results in terms of the type of tanker cars you are using? We have read in the papers that there have been changes, but could you specify a couple of them so we have an understanding of what will be delivered to improve the system?
Mr. Lapointe: To get back to transportation of dangerous goods, for instance, we are looking at the change in the standards for construction. That doesn't happen overnight, obviously. The change in the fleet will not happen overnight. However, that is certainly part of what we're looking at in terms of changing the rules so that can happen more quickly than it would otherwise.
Senator L. Smith: What would your second objective be?
Mr. Lapointe: The second objective has to be ensuring greater competitiveness and investment in transportation critical infrastructure. We have the direct project in Windsor.
Senator L. Smith: Where is that project at this particular time?
Mr. Lapointe: It is progressing. We are looking at the purchase of properties both on the Canadian side and shortly on the American side.
Senator L. Smith: Has the resistance from the American who says he owns the bridge diminished or disappeared?
Mr. Lapointe: It is my understanding that is continuing. There is sustained interest, if I can use those terms, in looking at what the next moves for Canada are.
Senator L. Smith: In terms of your timeline, with the delays that are not your fault, obviously, what would be your projected time frame for completion? Is there a projected timeline possibility or is it still on hold until you get the land agreed to?
Mr. Lapointe: I think we still have a few steps to go through before we are able to commit to a firm date on actual in-service.
Senator L. Smith: What would your third objective be?
Mr. Lapointe: The third objective is ensuring that our policies and programs are up to standard. On the regulatory side, we also have to look at our air regime, our marine regime from a policy perspective and make sure we have the rules in place to ensure competitiveness, and we are not putting Canada at a disadvantage from an air policy perspective.
Senator L. Smith: Could you give me an example? When you say policy perspective, I'm sure for you it's easy to understand, but for us it may be a little more difficult because we are not in your area of expertise.
Mr. Lapointe: The rules that surround, for instance, the access to different air markets, bilateral air agreements.
Senator L. Smith: Those are licences.
Mr. Lapointe: Essentially negotiations, which we do with DFATD, and trying to access foreign markets for our air carriers. If we want to add some flights from Canada to China, we would have negotiations ongoing with China to try and gain access. It's how we approach in terms of policy changes; it's how we approach those negotiations.
Senator Buth: Thank you for being here this evening. Mr. Patel, can you tell me where you're at in terms of staffing levels?
Mr. Patel: In terms of staffing levels?
Senator Buth: Yes.
Mr. Patel: I can give you an exact number. As of April 1 we have a total of 9,858 employees. Canada-based staff is 6,187 and locally engaged staff is 3,671. That's the current workforce.
Senator Buth: And the locally engaged staff?
Mr. Patel: Those are employees of the department, but they are hired locally abroad so they are not Canadian-based diplomats posted abroad. They reside in those countries and we hire them to work in our missions.
Senator Buth: Would this now make you one of the largest departments?
Mr. Patel: I'm not sure where we are in the overall list of departments. We are in the top 10, but I don't think we are in the top five. We are watching that staffing level very carefully. What I mean by that is we are recruiting again. We are looking to address attrition, succession plans and things like that, but we see that as a level that allows us to deliver on our programs and services at the present time, and it's been relatively constant over the last couple of years.
Senator Buth: Is Shared Services Canada providing support to you?
Mr. Patel: Yes, Shared Services Canada, we are one of the departments under the umbrella of Shared Services Canada.
Senator Buth: Are there any issues in terms of the amalgamation of CIDA into DFAIT?
Mr. Patel: From a Shared Services Canada perspective, you could say there are issues, but they are not issues that are unmanageable. One of the challenges is we were on two completely different email systems and platforms, so bringing them all together as an amalgamated department is something that is under the umbrella of Shared Services Canada. So we have to work with Shared Services Canada to help us with our amalgamation plans, so we have regular meetings and collaborate with them, but there is only so much we can do on our own without Shared Services Canada stepping up. Where we have identified issues or challenge, we sit down and develop a good plan on how it will work. If we need to accelerate timelines, we work with them on how that could happen. They lead on this, but we can help with additional resources or support, if need be, in order for us to help us deliver our goals and help them fulfill their obligations, so we can do some of that together.
Senator Buth: Page 144 in the English Main Estimates, under "Highlights," you say there is an increase of $120 million for the crisis pool quick release mechanism. Is that listed in detail in the following pages somewhere?
I seem to recall that there used to be 100 or $200 million set aside, so how much is the total crisis pool quick release mechanism now?
Mr. Patel: The quick release mechanism is $120 million. There is a crisis pool, which is a set of funds set aside in the fiscal framework that we have available. It's part of the international assistance envelope, and at any given time, that crisis pool could be up to $400 million, of which the $120 million belongs.
The reason why we have that $120 million is this pool is designed for large-scale, multilateral coordinated responses to large international crises, where Canada would be a part of this large-scale, multilateral response. This pool was created after the 2004 tsunami, and the reason we have this quick release mechanism is if something happens and we need to access a large amount of money that is in the crisis pool, those funds don't reside in our reference levels, so if we needed to respond right away, we would need to use other sources of funds in our department's reference levels until supplementary estimates, where we could get access to a large amount of money.
We have this crisis pool quick release mechanism. This pot of $120 million resides in our reference level but it's frozen. We can't access it immediately but if there is a big response necessary for a disaster or some type of crisis, our Minister of International Development, with the support or concurrence of the Minister of Finance and the Prime Minister — so we work closely with the Privy Council Office and the Department of Finance — can immediately authorize the release of that money that's sitting in our reference levels, and we don't need to wait for the supplementary estimates.
As for the $120 million, you are correct in pointing out that in the past it was $20 million on the Foreign Affairs side, and $100 million on the CIDA side, and it was piloted. What this is now doing is taking that consolidated amount and putting it permanently in our reference levels on an ongoing basis because it seemed to be a positive thing that allows us to respond quickly, but not use that money for other purposes.
Senator Buth: When did the pilot start?
Mr. Patel: The quick release mechanism, 2010-11 fiscal year.
Senator Buth: It's been three years then?
Mr. Patel: Three full fiscal years.
Senator Buth: I have some questions for Mr. Lapointe.
The Chair: Mr. Patel, if you don't use any or all of the $120 million in a particular year, it goes back to general revenue. You can't use it for other votes or other purposes; is that correct?
Mr. Patel: That's correct. It goes back to the international assistance envelope, so at any given time, you would have up to $400 million in the crisis pool, and that $120 million would be in our reference levels the following year, but that is correct. It returns to the international assistance envelope.
The Chair: Do you need to come back to Parliament and ask for approval again and explain that you need 120 again for another year?
Mr. Patel: No, now that it's in our Main Estimates, it would be there on a recurring basis.
The Chair: Every year we will see it in there.
Mr. Patel: That's right.
Senator Buth: Mr. Lapointe, I had trouble writing numbers down as you were going through your comments. I may have these wrong.
Did I hear you say that $357 million has been put aside for rail safety initiatives?
Mr. Lapointe: No, that is for safety and security of the travelling public. It is a lot broader than just rail. It includes aviation, marine, transportation of dangerous goods and aviation safety.
Senator Buth: Where would I find that in the estimates?
Mr. Lapointe: If you go to page II-318, under "A Safe and Secure Transportation System," you will see the amount, starting with aviation safety, marine safety, rail safety, aviation, motor vehicle safety, transportation of dangerous goods, marine security, multi-modal safety and security and surface and intermodal security.
Senator Buth: The total there is 357.
Mr. Lapointe: Yes.
Senator Buth: Do you have any increase in your estimates in terms of dealing with Lac-Mégantic?
Mr. Lapointe: If you look at the transportation of dangerous goods line, there is an increase of $1.6 million. I will give you the actual figure.
Senator Buth: Where is that?
Mr. Lapointe: If you look at page II-318, the transportation of dangerous goods line, the amount in 2013-14, $13.159 million, is now increased to $14.727 million.
There is a slight increase on the rail safety side.
Senator Buth: The government announced that funds essentially would be going to Lac-Mégantic. Is that included in here?
Mr. Lapointe: Do you mean the funds going to the municipality?
Senator Buth: Yes.
Mr. Lapointe: No, these are strictly for Transport Canada's programs, inspection and oversight.
Senator Buth: Would that money be an emergency?
Mr. Lapointe: That would be probably in the economic development for regions of Quebec, DEQ budgets, I suspect, but I can't confirm that. It's not part of Transport Canada's appropriation.
Senator Buth: Under "Gateways and Corridors," at the top, there is that very large increase over the last two years. What does that comprise?
Mr. Lapointe: I will get you the detail in a moment. Essentially, they are re-profiling of infrastructure funds from previous years into 2014-15; it could be from last year or previous years.
Senator Buth: What were they being re-profiled from?
Mr. Lapointe: It depends on the project. There are projects that were not delivered during the said period. The money from previous years, either 2013-14 or previous years, was assessed as being likely spent in 2014-15, which accounts for the increase there.
Senator Buth: Could you provide to the clerk some more detail on this in terms of the amount of funds that were re-profiled from previous years and the projects they are going towards? I would assume the Detroit bridge is in here, so funds weren't spent previously that might have been allocated are now being reallocated. If you have those details now, that would be great, too.
Mr. Lapointe: I have sort of bulk numbers; I don't have the actual project. For instance, in grants and contributions, there is a $327 million increase to better match funds for the Gateways and Border Crossings Fund. That is more than likely the Detroit bridge, but I will get the details for the committee.
Senator Buth: That would be great. Include the re-profiled portion of that and where it came from in previous years.
Mr. Lapointe: I will.
Senator Callbeck: Continuing with Mr. Lapointe, on page 318 you're looking at A Safe and Secure Transportation System. I notice under Aviation Safety, about $45 million will come out. How can you take that much money out and still continue to have the same level of safety?
Mr. Lapointe: I will explain the shift in financing. The change is actually $43.9 million. The bulk of that is $38 million in our Airports Capital Assistance Program, which we shifted from aviation safety into infrastructure. It stays within the department; it's just a change in reporting line. The money is still there and is still used for the same purpose, which is financing safety projects for small airports that are not owned by the federal government. That money remains intact. It just changes from one budgetary item to another.
Senator Callbeck: That's gone up to Transportation Infrastructure.
Mr. Lapointe: Yes.
Senator Callbeck: At page 319, the Ferry Services Contribution Program. That's taken a tremendous hit in the last couple of years. It's gone from $32 million to $29 million and now it's down to $16 million this year. As you know, we have ferry service in P.E.I. even though we have a link. We have a ferry at the other end which is vital to the province. Will it affect that service in any way?
Mr. Lapointe: The funding for the contribution for the ferry services was renewed in Budget 2014, so that money will be accessed during the current year. It is not reflected in the Main Estimates because the Main Estimates are created before the budget. There is a renewal of this contribution.
Senator Callbeck: Will we see that in the supplementary?
Mr. Lapointe: You will see that probably in sups B.
Senator Callbeck: I notice a line item, Contributions to provinces towards highway improvements. That was $21 million, then it went to $19 million; and this year it's down to $8 million.
Mr. Lapointe: Yes.
Senator Callbeck: Are you talking to the provinces about another program to replace that?
Mr. Lapointe: This is a specific program for the Outaouais Road Development Agreement, which goes back to 1972. The amounts vary from year to year because they depend on the requests coming from Quebec for this specific agreement. It depends on the capacity of the provincial government to build, create and renew the infrastructure on the Outaouais side.
Senator Callbeck: That's just Quebec. It says Contributions to Provinces.
Mr. Lapointe: Yes.
Senator Callbeck: But it's just going to Quebec.
Mr. Lapointe: That is the long title of it, but if you look all the way to the end, you will see that the Outaouais Road Development Agreement is the only thing covered under this item.
Senator Callbeck: All right. That's fine, thank you.
Under Foreign Affairs, Mr. Patel you mentioned the spending review of 2012 when $52.3 million was identified to be taken out this year. Could you tell us what programs, services or positions were affected by that?
Mr. Patel: We are entering the third and final year of the three-year Budget 2012 spending review reductions. For this particular item, with amalgamation, we had the former CIDA reductions and the former Foreign Affairs and International Trade reductions. We are continuing to ensure that those initiatives to achieve those full reductions as planned are implemented, monitored and tracked to their full completion. This is one of those areas of amalgamations where we are not mixing things up or comingling or cross-subsidizing, so we will continue that.
The $52.3 million reduction highlighted in the Main Estimates, which you refer to, is the third and final year incremental reduction on the former Foreign Affairs and International Trade side. The former CIDA side's third and final year reduction has already been incorporated into that $3 billion transfer articulated as part of the Main Estimates transfer. The $52 million is the incremental for the third and final year. The total reduction for the former DFAIT is $197.1 million over three years; so $52.3 million was the final piece.
At the end of the second year of the three-year implementation, on the former CIDA side we had achieved all of the intended reductions. We are entering the final year. On the former DFAIT side, we had slightly exceeded — meaning we were ahead of schedule, if you will — on the reductions. At the end of the second year, two thirds in, we were about 70 per cent or so complete in terms of achieving out reductions.
In terms of what type of initiatives, there are numerous different elements. On the former CIDA side, there were some reductions to programming — some countries were no longer to be programming in the future. On the former Foreign Affairs and International Trade side, the primary focus was on consolidation or administrative functions. It's been a real mix of things. For example, at our missions abroad we are focusing more on hub missions or large missions, supporting administratively a number of small missions. Rather than have two or three accountants in every one of our 170 some odd missions abroad, we would do regional processing of invoices, accounting operations and administration.
We also closed some of our trade offices or consulates where we were focused on trade in the United States. We continue to offer those services to those areas through existing offices or by embedding trade commissioners into associations or other organizations in cities where we no longer have a presence. Some of that we did across Canada as well. As we rationalize some of our property footprint, it will result in some operational savings as well. Instead of leasing costs, we may buy property; instead of high maintenance costs on some properties, will dispose of those properties to acquire smaller properties. It is a mix of those initiatives. The primary focus is largely administrative in nature rather than front-line impacts, if you will.
Senator Callbeck: Could you give the committee a written detailed outline as to where you got those savings, and match each item to the amount in dollars?
Mr. Patel: I would be happy to provide the committee with that off line in writing. We will be able to put that together.
Senator Callbeck: Under Internal Services, there is a big increase. Is that to do with bringing CIDA into the new organization?
Mr. Patel: That is exactly what it is.
Senator Mockler: You said "New Brunswick," which will open my line of questioning for Mr. Lindsey. It has been sometimes confusing reading certain articles. I am sure that I am not the only senator at this table who acknowledges that Irving shipbuilding is a world leader. Therefore, I look at the Government of Canada, which is following through on its commitment to build ships in Canada. According to the Canadian Association of Defence and Security Industries, the National Shipbuilding Procurement Strategy will mean 15,000 long-term jobs and $2 billion annually in economic growth over 30 years. You can comment on that.
My two little questions will be: Are we going to meet our targets, and do we remain on track to cut steel and begin construction in 2015?
Rear-Admiral Finn: Yes, we continue to move forward to cut steel in the case of the Arctic offshore patrol ship in 2015.
I will also tell you we have a lot of work already under way across the federal fleets, and the shipbuilding strategy has already helped us immensely. I speak about the modernization of the Canadian patrol frigates, which is happening on both coasts. On the East Coast, Irving Shipbuilding is modernizing seven of our frigates. It is a substantial amount of work there. They just finished building the midshore patrol ships for the Canadian Coast Guard. That is another fleet that has been delivered and is now seeing operations.
The facility in Halifax itself — if you were to go down Barrington Street, you would see something pretty incredible rising in that shipyard. The old facility has been pretty much torn down now and they have done all the work in the harbour, the land level and the foundation and it's starting to appear. In about 12 months' time, most of that facility will be up.
In the current year, and as we work through what we've called a definition contract, but it's the buy long lead items, it's to finish the design and to start to do some work. We are going to build some test modules to actually prove out the entire facility, and that will happen in the first half of next year.
Later this year, we will be getting into the detailed negotiations for the Arctic offshore patrols ships such that we can start building those again, coming on the heels of the work they're already doing with that.
Beyond that, in the strategy and the long-term description the way you've presented it in jobs and the dollars associated — it would then do what I would call build through the Arctic offshore patrol ship to the next generation of surface combatants, also being built in Halifax. We're doing some very early work in the design there, and it is quite early. We're engaging industry quite extensively. It is quite a complex ship.
Similarly on the West Coast — predominantly our Coast Guard friends, but for us, the joint support ships will be built out there. We're in detailed discussions with Seaspan, which has several shipyards in Victoria and Vancouver. Their shipyards in Victoria are now modernizing five of our frigates. Again, it is an extensive undertaking. They are also responsible for all the heavy maintenance of our submarines, and they're building on that expertise as they equally build quite an impressive yard in Vancouver to start building first for the Coast Guard and then for us the joint patrol ships.
So we are on target to start cutting steel for the Arctic offshore patrol ships next year, and the strategy continues to deliver what we hoped, which is really a long-term relationship that allows us to leverage fleet after fleet in the long term.
Senator Mockler: Meaning with Saint John Shipbuilding Inc.
Rear-Admiral Finn: With Irving Shipbuilding Industry? They have multiple facilities, principally in Nova Scotia and P.E.I. But with Irving on the East Coast for the Arctic offshore patrol ships and our Canadian surface combatants. On the West Coast — and it's a multi-decade relationship on the West Coast to build principally for the Coast Guard, but for us the joint patrol ship, replacements for our supply ships.
Senator Mockler: All I can say is thank you for what you do for Canada.
The Chair: Keep up the good work is his comment.
Senator L. Smith: Just to follow up from the Honourable Senator Mockler.
For Defence, Mr. Lindsey — I read with interest your write-up: "Commencing in 2014-15, National Defence is implementing a new program alignment structure, PAA" — very sexy name — "composed of five programs plus internal services." What would the five programs be?
Mr. Lindsey: I'm going to defer to Major-General Poulter to deal with the PAA issue. By way of introduction, this is not particular to DND; every department has such a structure. It is the basic building block upon which all departments' estimates are built and their financial results expressed. Ours happens to have changed for the 2014-15 fiscal year, with the approval of Treasury Board.
Senator L. Smith: So the "program alignment architecture" is a term used within all departments in government?
Mr. Lindsey: Yes, it is.
Senator L. Smith: Great. And the five programs — if you could run through them quickly.
Major-General Ian C. Poulter, Chief of Program, National Defence and the Canadian Armed Forces: I'm delighted that you asked.
We realigned our program alignment architecture based on the fact that the previous one was a little difficult to understand. We've tried to simplify it so we can tell the story of what Defence does more appropriately within this framework as well as to Canadians.
I'm happy to explain the programs, but I'll read them to you. I'm happy to explain them in greater detail if you wish. We have: first, Defence combat and support operations; second, Defence services and contributions to government; third, Defence ready force element production; fourth, Defence capability element production; fifth, Defence capability development and research; and the sixth is actually internal services, which is common to all departments.
Senator L. Smith: Could you give us a little example of each? You don't have to go into detail, but a highlight would be good.
Maj.-Gen. Poulter: I would be happy to. Defence Combat and Support Operations consists of three subprograms, essentially conducting domestic and continental defence operations — such things as NORAD and Arctic response operations. The second subprogram is International Combat Operations, such as our standing NATO commitments and any responses to international crises and surge responses. The third one is Ongoing Centralized Operations and Operational Enablement. Essentially, those are things such as diplomatic support and intelligence surveillance and reconnaissance.
The second program, which is the Defence Services and Contributions to Government, covers a number of subprograms as well. The first one is Disaster Relief and Humanitarian Operations for things like earthquakes, floods, hurricane response, and humanitarian and evacuation responses, both at home and abroad. The Defence Services for Canadian Safety and Security are for threats to safety and security of Canadians, and includes support to such things as major Canadian events like the Olympics, support to other departments and agencies, antiterrorism and terrorism event response, as well as search and rescue operations inside Canada.
The third subprogram is Military Heritage and Outreach for sharing our military history and traditions, showcasing our military expertise and values, and developing leadership and good citizenship among Canada's youth. It includes such thing as military history, participation in ceremonial events such as Remembrance Day and Canadian and junior Canadian Ranger programs. The Cadet Program is included in that.
The third program is Defence Ready Force Element Production and it has a total of four subprograms. The first is Force Elements Readiness Sustainment. So it's sustaining activities for units that are ready to deploy, such as ready-duty high-readiness ships on the coast as well as our domestic immediate response units.
Senator L. Smith: Would that be what the admiral was alluding to earlier in terms of the production of ships and some of the combat vehicles that he's —
Maj.-Gen. Poulter: There's a later program that covers that. This is actually manned high-readiness ships ready to sail within their allocated response time — Defence and North America airspace in terms of our readiness there as opposed to conducting the operations.
The second one is Force Elements Integration Training, and that is training our major expeditionary task forces. We have a number of task forces on standby to deploy internationally as required. It is also to conduct interoperability training and exercises such as our exercises in the North — Op Nanook — as well as RIMPAC exercises in the Pacific.
The third sub-element is the Force Elements Production, and that is just for the normal ready force, such as ready frigates, infantry and strategic airlift units, ready on a unit-level basis but not in high readiness. It's to maintain that base level of readiness training before we put them into the cycle to be prepared to go out the door.
The last one is Operational Readiness Production, Coordination and Command and Control. It essentially covers the command and control that enables the readiness and the balance across maritime, land and special forces. That's essentially developing readiness plans, exercising our readiness coordination, et cetera.
The fourth program, Defence Capability Element Production, speaks to four subprograms as well, and this is where we get into the production of ships, et cetera. The first one is Military Personnel and Organization Lifecycle. It includes such basic things as military recruiting, basic military officer and occupation training, as well military health services.
The Materiel Lifecycle, which is the second subprogram, is essentially to procure the Defence materiel elements and make sure they're available in the correct quantity, mix and condition that we need them. It includes materiel acquisition, the ongoing maintenance, and also disposal of anything we need to get rid of.
The third subprogram is Real Property Lifecycle. It's essentially buying real property, maintaining decontamination if there is an environmental issue, and disposing of real property. So it's buildings, maintaining them, and disposing them when they no longer fit the purpose.
And the last one is Information Systems Lifecycle where we look at acquiring information systems, doing their maintenance and user support services. Shared Services Canada does not deliver all our IM/IT services to us. We're still required to deliver the military command and control, and we do deliver that separately from Shared Services Canada.
Defence Capability Development and Research is essentially what our science and technology people do for us, two subprograms. Capability Design, Development and Integration is examining the threat in the security environment analysis done by our force developers, military modelling and simulation, and defence technology development and demonstration.
The second subprogram there is Strategic Direction and Planning Support. It's essentially looking at the future security environment doing the threat assessments, military scenario development for our various missions and tasks, and looking at how we need to transform our capabilities to meet those future threats.
The last one is Internal Services, which is essentially defined for us by Treasury Board Secretariat. It defines those things that we have to group collectively, such as IM/IT services, travel administration, some of our asset management-type services we do inside the department.
Senator L. Smith: Thank you. If you take those five or six areas, is that basically your strategic outline of how you operate?
Maj.-Gen. Poulter: Absolutely, and I think that explains far better how we do it. We have forces conducting actual missions. The main focus of our efforts is maintaining ready forces to do those missions, whether or not they are committed. And the last couple are supporting those forces in the readiness training or while they're deployed.
Senator L. Smith: I know Senator Eaton has a question, but Rear-Admiral Finn, when you look your timeline for these equipment additions to upgrade your fleet and assist you in the strategic part of the plan, what is the time frame? Without being too specific, could you give us an example of the size of the program you have, as you mentioned to Senator Mockler, in terms of the ships, the deliverables? You said this is a multi-year commitment, multi-billion dollar commitment. But how is it going to roll out? If you had a crystal ball, how do you see it illuminating itself in terms of deliverables?
Rear-Admiral Finn: Thank you for the question. I can give you the example of ships, but it is true for all of the Canadian Forces. It is a continuous process of what we call capability-based planning, in which our peers and the Chief of Force Development continuously look at the threats, what needs to be done, what we need to counter, the environment we'll be working in, and to look at the future security environment and what we need to do there.
What we need is being continuously reviewed. That's why at times you'll see us step away from projects and introduce new ones. As the threat changes, how we deal with it changes. As a result, there is some change that continuously happens, but it is underpinned by a continuous program. The existing Canada First Defence Strategy, when announced, looked out 20 years of procurement acquisition and capability for the army, navy, air force and special forces.
I think specifically, as you asked about the naval context, if I again look to the East Coast we're looking at a build program that will go out to the late 2030s. What we have tried to create is saying there's the vision we have right now for another 25 years of bidding Arctic offshore patrol ships and the next generation of surface combatants, be it the replacement of destroyers or frigates. But ultimately the success of that strategy is what happens beyond it.
If you look at all of our major Western allies, they have rationalized shipyards. They have looked at this capability. Fundamentally, a consistent order book and the ability to reinvest in technology allows you to build and maintain ships, which is extremely important for us, and to try to drive down cost.
For us it really is a continuous process and drum beat. As the last of the Arctic offshore patrol ships come through the plate shop where they build steel, right behind it we would ideally want to see that we're building the next generation of surface combatant right behind it.
Senator L. Smith: Senator Gerstein had questions over the last couple of years about re-profiling. The concept of re-profiling, from a simplistic view, is that you delay a project or do something else with the money because there are some changes in your strategy. Is that the way it works? What role does re-profiling play in terms of whether it is a major issue or is it a 5 per cent type issue? Is it part of a safety buffer that you work with so you can make adjustments as you go forward if there are strategic changes to decisions on equipment, just so we understand that? We had a really interesting one on tanks a few years ago — and I'm being facetious — but if you could help me with that.
Rear-Admiral Finn: Thank you again for the question. If I could turn that around, our CFO has to re-profile because of us. It's not him re-profiling and affecting us.
Senator L. Smith: He said he was a re-profiler.
Rear-Admiral Finn: No. It's a number of things, senator. Some are frankly delays and issues, but if you look at our top 14 major capital projects that are either in definition or implementation, it is over $50 billion. When you look at what can happen in the short term that is only the top 14. There are others coming along. There are smaller capital projects, but the capital program we're executing is fairly significant. There are a lot of moving parts and complexity to what we're delivering, as I've touched on. There's a lot of complexity to that program.
As the project manager, we will try to anticipate what industry will say as we go out in a competition and sign a contract, but once we ink that contract and understand what the profile of spending will be, that will affect the allocation.
If a supplier is non-performing — so the maritime helicopter projects, we had a profile expand — we are not going to pay them until they perform.
We've had cases where the negotiation of the contract has shown that there's a reduction in cost and as a result when you talk about tanks, we've talked here about force mobility enhancement. We've negotiated some of those contracts at a lower price than was perhaps anticipated. It affects the cash profile. The CFO and his team have come in and brought a lot more rigor to this, but the reality is that each of these projects has its own life and issues that affect it and things happen with each one. There are delays and lower costs, as I've indicated. There are any number of things that affect it — the discussion with industry, the non-performance.
With maritime helicopter projects, for example, for the last few years we've said we anticipate getting through it. We've had money in the subsequent fiscal year. It has not been performing. We have not paid.
We are at a point now where we anticipate, and in fact we've reached agreement with the supplier to start delivery and acceptance next summer. That changes how we'll pay that money. The reality is with the program that we run, the complexity of it and the tens of billions of dollars involved, we don't get it all right and as a result we have to revisit the money we'll spend year in, year out. We revisit every year and it causes a shift across the whole program.
Senator Eaton: I have a quick question on the program alignment. Listening to you on the various task force and readiness, Major-General, would you have enough money to re-profile if we had to go to war tomorrow, if something serious happened in North America or in Europe? Would we be ready? Would we have the money or would you have to come back?
Mr. Lindsey: Perhaps we can deal with that in two parts. The general and the admiral are better placed to talk about that. With respect to the money piece, it is an element of the Canada First Defence Strategy. This was manifest during the combat in Afghanistan, and the adjoining mission in Afghanistan, that when the Canadian Forces have to deploy for expeditionary operations, the department is given incremental money to pay for those operations as is required. If the government deployed the Canadian Forces, the mechanism and the policy anchor exists to provide the incremental funding required.
As to readiness, perhaps I will refer to the Chief of Program.
Maj.-Gen. Poulter: With respect to your question, namely do we have our forces ready to go; we have our first six mission sets. Those six mission sets have forces assigned to them and a response time. We have a force structure to respond, initial response and a response time. All of the environments have declared that they are ready to meet those missions within those timelines given. From that perspective, they have adequate funds to have those forces ready to go. There are other units that are less ready but when they go into the cycle to replace those units, if those units are committed, the resources are then reallocated to them to allow that.
To put it simplistically, 100 per cent of the Canadian Armed Forces isn't ready 100 per cent of the time to do 100 per cent of the jobs because, frankly, that's unaffordable. We have our task forces, our missions, our ships and our planes required for that initial response within that time ready to go. Then, as and when they're committed, we receive the additional funds to maintain the readiness and improve the readiness or increase the contribution as need be for that training and for that readiness.
The Chair: We're just about out of time, gentlemen. Thank you very much for being here. I have two points that I want some clarification on, and I think it would be helpful to clarify the record. One is with respect to DND.
Mr. Lindsey, you talk about $347 million also included. There's an increase of that amount associated with the annual escalator for Defence. Can you refresh our memory on what that escalator is and what it applies to? Is it peculiar to DND?
Mr. Lindsey: Yes, Mr. Chair. Going back to the 1990s, there was a recognition that the Defence business is subject to Defence-specific inflationary pressures. A provision of 1.5 per cent was built into the fiscal framework to increase the Defence budget every year. That 1.5 per cent was revisited in 2010 and increased to 2 per cent. Every year the Defence spending envelope is increased by 2 per cent to help the department cope with this Defence-specific inflation and other inflationary pressures.
Is Defence the only department with such a mechanism? Other departments do have mechanisms to protect themselves or to help them manage cost risks. For example, Foreign Affairs is backstopped by Finance and Treasury Board with respect to currency risk. DND has currency risk but we are not backstopped; Foreign Affairs has a mechanism. Their risk management mechanism is different than ours but, suffice to say, Defence is not unique in having this kind of help.
The Chair: Thank you. It may be that you explained that to us once before, but I thought it was important to clarify it for the record since it was in your written submission.
Mr. Patel, the other question I have is in relation to the sale of assets — that is, the real estate Foreign Affairs has in various foreign countries. When something is sold in a foreign country, is that something you keep a record of for reinvestment purposes somewhere else or does it go into Consolidated Revenue?
Mr. Patel: It depends on the project itself. If you look at Macdonald House in London, which we sold recently for $562 million Canadian at the end of March, any proceeds over and above what it would cost to complete the refurbishment of Trafalgar Square's Canada House and the acquisition and retrofit of the building next to that, which we required — and we talked about this in the past in this committee — would return to the fiscal framework.
On other projects, when we do dispose of properties, we would typically have access to those funds to reinvest in other property acquisitions or other parts of our real property portfolio. We work closely with the Treasury Board Secretariat on any specific requirements that may be brought forward by Treasury Board ministers depending on the amounts, the strategy or what the plan would be for that particular country, whether it's a chancery or residences.
The Chair: If you needed to build an extension somewhere other than the U.K., let's say Ireland or Paris, do you have some lobbying advantage by having put some money into general revenue from the sale of the High Commissioner's residence in the U.K.?
Mr. Patel: I would say it's more than a lobbying advantage. We do have access to the proceeds of sale from properties abroad to reinvest in other properties abroad.
I used Macdonald House as an example because the numbers are so high that we wouldn't need that much money, a few hundred million dollars, to reinvest into our property portfolio. What we also have in our capital vote, which is in the Main Estimates, is a multi-year profile for some properties that may take a couple of years to develop. We have funds approved by the Treasury Board specifically for these investments.
The short answer is yes, we have the flexibility of reusing proceeds of sale. Occasionally we may not need that amount of money and it may return to the fiscal framework.
The Chair: The amount that's gone back to the fiscal framework I understand, but for the other money that you have the ability to use for other asset purchases, you don't have to come back to Parliament; you don't have to come to this Senate committee to talk about that?
Mr. Patel: No, because we're able to use those proceeds of sale in a recurring manner. We were granted authority some time ago by Treasury Board to do that.
The Chair: Are you able to provide the clerk with a list of what has been sold over the last few years internationally and what has been acquired? It would be interesting for us to see that. This is activity that's going on off balance sheet, in effect.
Mr. Patel: We can provide a list. I would be happy to provide any supplementary information to help with the process, if that would be useful as well.
The Chair: Any information you can give us on that would be helpful because it is an activity that we may not monitor as closely as some other things.
Thank you very much, gentlemen. Defence, Transport Canada, Foreign Affairs, you've been very helpful. We'll see you when supplementary estimates come along.
(The committee adjourned.)