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National Finance

 

Proceedings of the Standing Senate Committee on
National Finance

Issue No. 26 - Evidence - March 1, 2017 (afternoon meeting)


OTTAWA, Wednesday, March 1, 2017

The Standing Senate Committee on National Finance met this day at 1:47 p.m. to examine the expenditures set out in Supplementary Estimates (C) for the fiscal year ending March 31, 2017.

Senator Larry W. Smith (Chair) in the chair.

The Chair: Welcome to the Standing Senate Committee on National Finance, colleagues and members of the viewing public.

The mandate of this committee is to examine matters relating to federal estimates generally, as well as government finance. My name is Larry Smith, a senator from Quebec, and I chair the committee. Let me briefly introduce the other members of our committee.

[Translation]

To my left, from Montreal, and formerly with La Presse, is someone well-known, Senator Pratte. From northern Ontario is Senator Moncion, who is well-known in the world of finance. Welcome.

[English]

On my right, from the Rock, and this lady has been the Auditor General of the province of Newfoundland and has spent a great deal of time in the Senate in key roles, Senator Beth Marshall.

To her right, a man well known in B.C. politics at the provincial level and in the Senate for many years, Senator Richard Neufeld.

And our judge, from the province of Saskatchewan, well-known, manages many of our key committees, Senator Raynell Andreychuk.

[Translation]

Today we are continuing our study of the Supplementary Estimates (C) for the year ending March 31, 2017.

[English]

Today, to give us an overview of their funding requests in the Supplementary Estimates (C), we have five organizations appearing before us. During the first hour of our meeting, the panel is comprised of two departments. We welcome, from Global Affairs Canada, Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer; and Shirley Carruthers, Acting Director General, Financial Resource Planning and Management Bureau.

Shirley, that's a hell of a title. Congratulations.

Shirley Carruthers, Acting Director General, Financial Resource Planning and Management Bureau, Global Affairs Canada: It is.

The Chair: We also have officials from Employment and Social Development Canada: Mark Perlman, Chief Financial Officer, Chief Financial Officer Branch; Jason Won, Director General, Financial Management and Advisory Services and Deputy Chief Financial Officer, Chief Financial Officer Branch; and Alexis Conrad, Assistant Deputy Minister of the Learning Branch.

Three other organizations will appear as a panel during the second hour of our meeting.

We welcome you all and thank you for being with us. We are ready to hear your opening statements.

Mark Perlman, Chief Financial Officer, Chief Financial Officer Branch, Employment and Social Development Canada (ESDC): Good afternoon, Mr. Chair and members of the committee.

[Translation]

I am pleased to appear before you today in my capacity as Chief Financial Officer for Employment and Social Development Canada. Senior executives from key areas of ESDC are also in attendance to help me answer some of your questions.

[English]

The department delivers a range of programs and services that affect Canadians throughout their lives. The department provides seniors with basic income security, supports unemployed workers and helps students finance their post-secondary education.

[Translation]

We also have the mandate to maintain a strong, productive, healthy and competitive workplace within the federal jurisdiction through the Labour program.

Service Canada delivers ESDC's programs to citizens, as well as other Government of Canada programs and services.

[English]

Allow me to present the committee an overview of ESDC's portion of the 2016-17 Supplementary Estimates (C), tabled on February 14, 2017.

Supplementary estimates are tabled in the House of Commons by the President of the Treasury Board to obtain the authority of Parliament to adjust expenditure plans, as reflected in the estimates for the fiscal year.

[Translation]

Supplementary Estimates present information on spending requirements that were either not ready in time for inclusion in the Main Estimates, or have subsequently been updated over the course of the year to account for developments in particular programs and services.

[English]

Through these estimates, we provide Parliament with an update on various statutory programs. Statutory items are included in the estimates for information only since Parliament has already approved the purpose of the expenditures and the terms and conditions on which they may be made through other legislation.

As part of our Supplementary Estimates (C), you will note the budgetary statutory items forecast increased by $249.1 million. This is mainly due to the Canada Student Grants, a $196.1 million increase, as a result of changes following announcements made in Budget 2016 that increased certain Canada Student Grants amounts by 50 per cent. The new amounts have been in place since August 1, 2016.

Other than the statutory items, ESDC is seeking an additional $193.7 million in voted appropriations. This includes $178.4 million related to the write-off of debts owed to the Crown for unrecoverable Canada Student Loans. As a general practice, a separate vote is established for authority to write off debts. A loan to an outside body is considered a non-budgetary item since the loan is expected to be repaid. Student loans are an asset for the Government of Canada, and such write-offs become a charge against appropriation and therefore require Parliament's approval.

According to the Debt Write-off Regulations, debts should be written off in the year in which they are determined to be uncollectible. The Debt Write-off Regulations contain criteria under which accounts may be submitted for write-off. The main criterion is whether or not it's statute-barred.

The Canada Student Financial Assistance Act establishes a limitation period of six years between the time the borrower last acknowledged their Canada student loan and the legal activity the Crown can undertake to recoup that debt. Other reasons for write-off include bankruptcy, extreme financial hardship and compromise settlements. The request is consistent with such regulations as it has been determined that these debts are uncollectible.

The Canada Student Loans Program, CSLP, write-off of $178.4 million is primarily for debts of borrowers who defaulted in repayment in 2008 or earlier, for which efforts to collect the amount owed have not been successful.

The CSLP provides over $2.7 billion in student loans each year, with total loans over $18 billion at March 31, 2016.

The program helps students in financial need access post-secondary education while ensuring accountability for taxpayers' money.

[Translation]

The Government of Canada is assisting Canadians in managing debt loads through the Repayment Assistance Plan and by implementing measures to improve the repayment and recovery of Canada Student Loans.

[English]

Under vote 5, grants and contributions, $5.5 million is requested for Aboriginal Skills and Employment Training Strategy to support pilot projects to enhance training that aligns with indigenous community needs and to pilot an on- reserve indigenous labour market information survey.

Another $4.8 million is requested for the new Student Work-Integrated Learning Program, SWILP. This program will complement existing programming directed at helping young Canadians improve their labour market prospects. The SWILP will create more co-op placements for students in science, technology, engineering and mathematics, STEM disciplines, and business programs. In support of the government's innovation agenda to spur economic growth, the SWILP will support multi-stakeholder partnerships to create quality work-integrated learning placements and better align technical, foundational and work-ready skills development for Canadian students enrolled in post- secondary institutions.

Under vote 1, operating expenditures, ESDC is requesting: funding related to the Aboriginal Skills and Employment Training Strategy pilots, $0.3 million; funding related to the Student Work-Integrated Learning Program, $1 million; funding for the Old Age Security Service Improvement Strategy Project, $1.4 million, to implement the third and final phase of this critical modernization project; and funding for the government advertising programs, $2.5 million, to raise awareness of new and existing programs and services that either directly or indirectly benefit youth.

ESDC is also requesting three transfers between departments: a transfer from Indian Affairs and Northern Development, $0.7 million, to support the Kativik Regional Government Youth Employment Strategy; a transfer for an in-year reallocation of youth funding to other departments of $0.3 million. Each year Treasury Board authorizes the 11 participating departments and agencies to make in-year adjustments to their resource allocations when necessary, with the objective of fully expanding the Youth Employment Strategy funding envelope. This year, the Department of Natural Resources and the Canadian Mortgage and Housing Corporation have requested additional funds. And finally, a transfer of $0.6 million to the Administrative Tribunals Support Service of Canada, ATSSC, to address an increase in the number of appeals associated with Old Age Security.

Finally, you will note a net increase of $431 million for the non-budgetary statutory items, which include the Canada Student Loans and the Canada Apprentice Loan. This is mainly due to the fact that Budget 2016 increased certain Canada Student Grants amounts by 50 per cent. This resulted in reduced disbursement of loans as more borrowers have their financial needs met by this increase in grants.

[Translation]

I hope this overview has given you a better understanding of the Supplementary Estimates (C) for our department.

[English]

My colleagues and I would be pleased to answer your questions.

The Chair: Thank you, Mr. Perlman. Now we go to Global Affairs, please.

Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer, Global Affairs Canada: Good afternoon, Mr. Chairman, and senators. Thank you for the opportunity to be here before you today to discuss our Supplementary Estimates (C). I will make a few brief opening remarks and draw to your attention some of the highlights in our estimates, after which we would be pleased to answer your questions.

[Translation]

Global Affairs Canada has continued to contribute to international peace, security and humanitarian assistance, including by advancing the Women, Peace and Security agenda. We have increased our support for international conflict management and peace operations and contributed to multilateral efforts to fight terrorism and extremism.

[English]

In addition to supporting the ratification and implementation of the Canada-European Union Comprehensive Economic and Trade Agreement, we are working towards other initiatives, for example, our investment hub, and using our trade commissioners strategically in order to enhance Canada's ability to attract global investment and the jobs that come with it.

In 2016, Global Affairs undertook consultations with over 15,000 partners and individuals from 65 countries to support the renewal of a Canadian international assistance policy and funding framework that will protect and promote the human dignity of the poorest and most vulnerable across the world. Women and girls will be at the heart of this new approach.

[Translation]

The department is improving delivery of Canada's humanitarian assistance by providing more flexible, predictable, multi-year funding; prioritizing gender equality and local capacity; and better integrating our humanitarian and development efforts. As an example, the department has put this new approach into practice through Canada's commitment of $1.1 billion over three years to support those impacted by the crises in Iraq and Syria.

In November 2015, Canada announced a $2.65 billion contribution to help developing countries tackle climate change over five years. In delivering on this commitment, Global Affairs is working with a range of partners, including multilateral development banks with demonstrated expertise in innovative finance solutions, to engage the private sector in addressing global climate challenges. The department also responded to humanitarian emergencies in 57 countries and helped to reach over 76 million people with quality and timely assistance.

[English]

The breadth, scope and international reach of Global Affairs' mandate makes it one of the most complex departments in the Government of Canada. Its international reach is demonstrated by our international network of 179 missions across 109 countries, which provide services to Canadians and Canadian businesses, while also supporting the international work of 37 partner organizations located in our missions, such as federal departments, agencies, Crown corporations and provincial governments.

As is typical for an organization of this size and with this international reach, the department faces a wide range of challenges and uncertainties and volatility in the global environment in which it operates, including currency fluctuations, inflation, natural disasters, security and cyberthreats.

[Translation]

Against this backdrop of complexity and volatility, Global Affairs continues to place an unwavering emphasis on prudent and careful financial management to deliver its mandate in a sustainable, effective and efficient manner. We are committed to measuring our performance and communicating these results to Canadians, ensuring our efforts are having the greatest positive impact.

[English]

For Supplementary Estimates (C), I'll provide a quick highlight of the major items. Overall, the department is requesting $345.4 million through these estimates, which will bring the department's overall authorities to date to $6.57 billion.

This funding in the Supplementary Estimates includes $174 million to address humanitarian assistance requirements and antimicrobial resistance. This funding will be used to provide assistance to populations affected by the impacts of El Niño, including critical support and other basic needs until the next harvest season, as well as to address the immediate, life-saving needs of people affected by conflict or disaster and to maintain Canada's humanitarian assistance responses. The funding will also be used to address international action on antimicrobial resistance in vulnerable populations.

[Translation]

In addition, $133.0 million is requested to help developing countries address the impact of climate change. To deliver on the 2015 climate finance commitment of $2.65 billion, mentioned earlier, funding in these estimates will be used for contributions to support the Africa Renewable Energy Initiative and to the Asian Development Bank to support the Canadian Climate Fund for the Private Sector in Asia.

In delivering these initiatives, the department will continue to collaborate where appropriate, with other federal entities and provincial, territorial and municipal governments, and engage constructively with a diversity of Canadians and international stakeholders.

[English]

We also ensure the highest standards of service to Canadians, particularly those who require consular assistance abroad.

I will stop there, and we will be pleased to answer any questions that you have.

The Chair: Thank you very much. We will now start with question from senators.

Senator Andreychuk: Unfortunately, I'm covering two committees, so I'm going to just restrict myself to a few explanations.

I understand that money is allocated or will be allocated for the government's wish to seek a seat on the UN. Is it in the Supplementary Estimates? Will it be going to budget, and how much is it?

Mr. Thangaraj: They are not contained in these Supplementary Estimates. As to the campaign for the UN Security Council, there is additional and incremental work involved. To date, what we have done is re-prioritize within the department to assign personnel to provide dedicated attention to that campaign.

Senator Andreychuk: Can we later get in writing where you have taken the money from to do that?

Mr. Thangaraj: Sure, we can provide you with the resources that have been allocated to that.

Senator Andreychuk: The reallocation. I would like to know where it came from.

Mr. Thangaraj: Over the course of years, our priorities shift, and what the organization does, on a constant basis, is that we will — especially in the international context, as these campaigns or other issues emerge, some others drop off, and so we reallocate.

Senator Andreychuk: But that's what we need.

Mr. Thangaraj: Sure, we can provide that explanation.

The Chair: That would be great if you could get it to our clerk.

Senator Andreychuk: The second question is in the same vein. We understand that there may be a peacekeeping operation into Africa. It's been announced that there possibly will be but not yet where. That will incur expenses for your department also. Has that been factored in anywhere?

Mr. Thangaraj: Any peacekeeping operations are not included in these Supplementary Estimates.

Senator Andreychuk: I realize the Defence, but it's going to take personnel at all the missions and the support systems and those being brought in.

Mr. Thangaraj: As part of the planning process for any potential peacekeeping operations, we have looked at what the resource requirements are. We are working with the Department of National Defence in order to determine what the precise nature of that resource ask is. We don't have that specificity until it is determined where, but that work is continuing.

Senator Andreychuk: Again, if it's determined, I would appreciate receiving that through the clerk of the committee.

My final question is in the same vein. With the resources you referred to and the complex number of countries that we work in, the security issue is obviously of high, high importance to the families, to the officers and to the assets that we have. Is there anything being redone to ensure that we have a heightened alert and a heightened protection for those assets and particularly for the families and the officers? Is that reflected in this budget, or will it be coming? I know we have been increasing it and all that, but most other countries have moved very strongly in putting that as a first priority, and I'm wondering whether Canada has done that.

Mr. Thangaraj: This has been a key priority for our department for a number of years. If you look in our departmental plan, our report on plans and priorities, the security of our personnel abroad, our missions, the information, our assets are listed as a key risk. In all of our planning processes, we integrate security factors into that, into our budgeting, into the movement protocols of our staff, into the assets we place there.

When I was here in November, we talked about our mission security risk model. We have a function within the organization that consistently analyzes intelligence, through our partners and other countries, to determine what risk Canadians have in our assets across our mission network. You just have to follow the news to see how quickly that evolves.

When that happens, we will make operational adjustments. We will deploy resources to those locations in order to mitigate the risks as best we can. In these Supplementary Estimates, what you will see is a transfer from capital funding to operational funding to fund mission security in missions that are located in developing countries, most notably in Kabul.

We have funds, for example, in capital, that is, for hard infrastructure, for example, for armoured vehicles or for other capital assets. But occasionally, depending on that risk environment, we will have to shift into, for example, using local guards or close protection, which is an operational expenditure, so what these estimates do is ask for the authority to switch from capital to operating to reflect the requirements given our security environment.

Senator Andreychuk: It's somewhat worrying that we're taking from capital and not identifying fully our needs and having a capability to move quickly rather than, again, re-shuffling. The rob-Peter-to-pay-Paul principle perhaps should not be applied here. I leave that as a comment that you can take back to the minister or anyone else.

Following that, consular services are increasing because of the risk to Canadians who may find themselves now anywhere in the world and at risk. Is there anything in this estimate, or are you working on anything to provide quicker and more appropriate consular services because of this increased world risk?

Mr. Thangaraj: Our consular service is another direct service we provide to Canadians through our mission network.

We have had to adapt to changing travel practices. On our website, we ensure the travel advice to Canadians is constantly updated. Last year, we rolled out a mobile app that pushes notifications to travellers abroad to alert them of changing threat environments or measures that they should take to protect their safety.

Senator Andreychuk: Have you increased costs in personnel?

Mr. Thangaraj: Year over year, if you look at our Main Estimates and our Departmental Performance Report, the resources that we have for consular have been stable, and that's based on an analysis of the level of services. In our Departmental Performance Report, we have service standards articulated to meet consular services, and given the shifting threat environment, we have been able to meet them.

Internally, though, we've resourced areas that require support for more complex files — for example, involving children. We have, again, re-prioritized funding internally to bolster capacity in those areas.

The Chair: I have a little supplementary to the senator's questions. When you have to move quickly and there's some issue, whether it's human or structural, who makes those decisions?

Mr. Thangaraj: In terms of mission security?

The Chair: Yes.

Mr. Thangaraj: There are a number of levels. Interdepartmentally, we work with PCO, the Department of National Defence and our partner organizations in terms of what the most appropriate response is to those situations.

The Chair: Who flags them first? Where does it start?

Mr. Thangaraj: We have an intelligence section within the organization.

The Chair: Okay.

Mr. Thangaraj: It shares information with our partners and allies to flag emerging situations. They come back to the department, and we engage with our partners intergovernmentally.

Senator Marshall: I have questions for both departments, and I'll start with Global Affairs. In your introductory remarks, you referred to the consultations that began in 2016. What's the status of those consultations?

Mr. Thangaraj: Those consultations have wrapped up. We did quite extensive consultations across Canada with partners, and what has emerged is that we have issued on our website what we have heard in terms of what the priority areas for the government should be in international assistance. For example, one of the priorities was focusing on vulnerable populations. You see that in ministers' mandate letters, where we will focus our assistance on the vulnerable and the poor.

Another is to focus on women and girls, building on the maternal and newborn child health initiative to apply a feminist lens to get to the root causes of poverty and to ensure that women are involved in various stages of development. We're looking at how we partner with the private sector and the approaches that we use to engage Canadian organizations.

There's a vast number of observations that we have. Now, internally, we're taking the evidence we heard and the data we gathered, and we will formulate that in a formal response as a new policy under national assistance.

Senator Marshall: Can we expect to see a link between the results of those consultations and what we will find in the Main Estimates when we start to review them?

Mr. Thangaraj: Most likely the Main Estimates will not reflect those because of the timing. We submitted our Main Estimates request in the fall, and the consultations and the analysis of the consultations were ongoing. If there are any new funding requirements from the consultations, we will see those in supplementary estimates.

Senator Marshall: Supplementary Estimates (A), not the budget, not mains but the —

Mr. Thangaraj: It will be in (A), (B) or (C).

Senator Marshall: The link should be there.

Mr. Thangaraj: That's correct.

Senator Marshall: Okay.

My next question is for Mr. Perlman, and it's regarding the student loans. You referred to those in your opening remarks. I want to start off by asking for clarification with regard to the grants. Are there no loans anymore? Is it all grants?

Mr. Perlman: No, there's actually a combination of loans and grants. We have just been increasing the number of grants as a result of Budget 2016 decisions, but the vast majority is still Canada Student Loans.

Senator Marshall: When you referred in your opening remarks to the budgetary statutory items increased by $249.1 million, and then you say it's mainly due to Canada Student Grants of $196.1 million, what's the difference?

Mr. Perlman: The grants was the increase. I could actually turn that over to my colleague Alexis Conrad, who is in charge of the Canada Student Loans.

Senator Marshall: You talk about $249.1 million and then you said 196 was related to the student grants. What's the difference? Is it loans?

Alexis Conrad, Assistant Deputy Minister of the Learning Branch, Employment and Social Development Canada (ESDC): The difference would be the loans. The grants are non-repayable. The students get those, and they have to pay back the loans. When students apply, they get a needs assessment done, and we give them the grants first. The difference is made up in the loan.

Senator Marshall: Within the department, there's a group, division or whatever — I don't know what the terminology is — that's responsible for the portfolio management of student loans? Am I understanding correctly that there would be a group responsible for that? Or is it contracted out? I'm trying to get a handle on how you manage your student loan portfolio.

Mr. Conrad: In effect, there are several different partners in the program. The first piece is that we work with most provincial governments — the ones that participate in the program.

Senator Marshall: Yes, I'm familiar with that.

Mr. Conrad: There's a partnership there. We have a private-sector service provider that's been managing loans, both provincial and federal, for several years.

Senator Marshall: Okay.

Mr. Conrad: That's where the students generally engage. Then there's also our department, which manages a lot of the pieces that the service provider or the provinces don't. We have part of the call centre; we deal with a certain number of calls on complex cases. We deal with the policies, programs, decisions, the legislation and the regulations — that piece.

Senator Marshall: That's done internally?

Mr. Conrad: It's done at ESDC, yes.

Senator Marshall: What about the collection? Is that also done internally, or is that contracted out? How does that work?

Mr. Conrad: The trick is how we're defining "collection." When the student finishes their studies, they have six months' grace in terms of not paying it back. At that point, they are notified by the service provider, and they are given information about how much they owe. They will reach an agreement on how to pay the loan back.

As long as the loan is in good standing and the student pays it back, it will be the service provider that deals with it. If the student defaults on the loan, after a period of time when they stop paying, ESDC refers the case to the Canada Revenue Agency, which will then seek to collect the loan.

Senator Marshall: Okay, so then it's their responsibility?

Mr. Conrad: Once it's in default and the student is no longer paying it back or communicating with us, we will refer it to CRA for follow-up.

Senator Marshall: A number of times now there have been provisions either in the estimates or supplementary supplies for the write-off of student loans, and we always have questions on it. Has the Auditor General ever conducted an audit of student loans that you're aware of?

Mr. Conrad: I'm not aware, to be honest, senator. Not recently, if it has been.

Senator Marshall: Would there have been an internal audit or any type of internal review conducted?

Mr. Conrad: Yes, we have an internal audit branch that periodically will look at different aspects of how the program is being managed, as well as any other department or the province that's engaged.

Senator Marshall: So would those audits be on your website? I'm trying to —

Mr. Perlman: All of our audits, once they are completed and the management response is in there, get published on our website.

Senator Marshall: I'm trying to get an understanding of the student loan. It comes up every year, and it came up yesterday again at our meetings. I'm just trying to get an understanding of exactly how it works.

If you have any type of internal review or audit that's been done, I'd appreciate receiving a copy. Primarily, the purpose would be to get an idea of exactly how the student loan program works and how it's being managed by your department. That's basically what I'm trying to find out. If you have something of that nature — I would think it's a big program, so you must have internal audit done or some sort of program review — I would appreciate it if the committee could get a copy of it.

Mr. Perlman: We can do that.

Senator Marshall: That way we don't have to revisit it every year and keep repeating ourselves.

The Chair: Just maybe a supplementary to Senator Marshall's: If you look at a 10-year rolling period, what is your average? I know that you have 6-year delays before you determine that something is going to be written off, but, if you look over the last 10-year period, what's your average percentage? What's the actual dollar volume to see whether there's a consistency of the student write-offs? Do you get my question?

Mr. Conrad: Yes, senator. I don't know what the 10-year average is. What I can tell you is that, over time, the size of the portfolio has grown, so we're loaning more money out. In fact, this year we are at $19 billion. As a percentage, the amount that's written off every year has continued to go down, and this year we are below 1 per cent. So we are doing a better and better job at recovering more and more of the loans. So that's the trend line we're —

The Chair: And we understand the answer that we get from you folks in terms of $18 billion or $17 billion. It's a huge portfolio of loans. But $178 million is a lot, and we have read about other countries that have instituted recovery practices that have had some success. We're just wondering if you folks have looked into what other countries are doing from a success perspective. Imagine if we could cut the outstanding amounts from $178 million to 80 million. That's 80 million that would be used somewhere else or put back into the coffers of the government. I get a little excited when I hear people say, "Well, it's only 1 per cent of 18 billion." Well, wait a second, $180 million is a lot of money, and I'm not sure that's the attitude that we should have as administrators of our business process.

Any comment? If you could show us something over a 10-year period, even if your amounts have gone up in terms of your loan portfolios, it would be a logical sort of answer to give us as opposed to that it's only 1 per cent.

Mr. Conrad: I will say that, some years, as the loan regimes have changed, the amounts have differed quite a bit. So, at one point, the banks were dealing with the loans, and we still see students — there are still a few these days who have been longer-term students — who are paying those back. So we're only now, in the last two or three years, starting to see the earlier borrowers from when the federal government took back the responsibility for the program. All of the people who are in repayment are starting to be our clients rather than the banks'.

The Chair: I understand that, but, again, that's not necessarily the answer you want to hear because that's sort of saying, "It's not our fault because somebody else did it."

Mr. Conrad: No, senator —

The Chair: It was managed by somebody else. If you could get us some form of an answer, no matter what it is, just to help us to understand, because $178 million is a lot of money. If you multiply that and have X number of departments, departments have relationships with people, and suddenly you say, "Well, there's 178 there. There's 80 there. There's 90 there. There's 40 there," and add it all together, are we as effective as we possibly can be? We're looking at performance and results.

Mr. Conrad: Senator, I agree with you. We are also very concerned with performance and results, and we have been dedicating more and more time and analysis to trying to bring this number down and trying to make sure that anyone who borrows money pays it back.

The Chair: If you could get back to us with some form of an answer, even if it's a one-paragraph answer, to see that you've thought something through, it would really be helpful to us. Could you do that?

Mr. Conrad: Yes.

The Chair: Great.

Senator Marshall: I just wanted to clarify what I was looking for. If there's an internal audit report that you have, the committee would be interested, or I would be interested, in reading I, or any sort of internal review or even external review, if you've had an external review. I would just like to request a copy of that, if you have it.

Senator Ataullahjan: My question is for Global Affairs. You said that — I don't know if you are at liberty to tell me about this — you contribute to international peace, security and humanitarian assistance, including by advancing women, peace and security. Can you tell me a little bit about that?

Mr. Thangaraj: We have a number of programs where we look at women's roles in developing countries, and, as I said before, part of the outcome of the International Assistance Review is that women should be the focus of development because it allows us to address root causes of poverty and stability.

Our development efforts are focused on getting to the heart of those by various interventions — through health interventions, by increasing women's economic empowerment, by increasing women's activity in the economic marketplace, for example, as well as other interventions, basic safety and issues for women in refugee camps, for example, to ensure that the incidents of sexual violence and all of those things are minimized. Our programming in peace and security and international development runs the array of those types of interventions.

Senator Ataullahjan: What exactly is it that you do? You're saying you support, but in what way and how exactly do you do that?

Mr. Thangaraj: I don't have specific programming examples. I could get back to you with those specific examples.

The Chair: If you could give us a one pager?

Mr. Thangaraj: Sure, absolutely.

The Chair: We don't need a brick. Would that be helpful, senator?

Senator Ataullahjan: Yes.

You talk about contributions to multilateral efforts to fight terrorism and extremism. Extremism, how are we doing that? Who are we supporting? What are you doing?

Mr. Thangaraj: Sure. We work, again, with our multilateral organizations and with institutional partners, such as the United Nations, NATO and other organizations in our fight against extremist organizations, such as Daesh and others. Again, I have very high-level information on it. I could get back to you with specific examples on that.

Senator Ataullahjan: Officially, are we calling them Daesh now? We changed that?

Mr. Thangaraj: Yes.

Senator Ataullahjan: Okay. Thank you.

Senator Pratte: Welcome to the committee.

I have a couple of questions related to the funds that we are contributing to help developing countries facing climate change. There are quite important amounts of money in these supplementary estimates, $130 million in funding to help developing countries address the impact of climate change.

I understand much of that money goes through international institutions. I know there have been reports that, in some cases, at least through UN organizations, there have been questions raised as to how efficiently those monies have been used in the past. I'm wondering whether we do have mechanisms to make sure that those monies are well used, efficiently used, so that the aims are reached.

Mr. Thangaraj: On the funds that we're requesting for climate change — and we have done so in the past, for example, for the Green Climate Fund — we work with multilateral development banks in order to flow those funds. As part of that process, those individual banks have a risk-analysis function, so they are looking at, when they are flowing funds, can the entities deliver on their commitments for the individual projects? What are the internal controls to make sure that funds are used properly, that there's no misdirection of funds and that we achieve results?

One of the other things that we do as part of our membership in these banks or involvement in these banks is that we have direct oversight. For example, on the Asian Development Bank, there's an executive director from Canada who sits on their board of directors and who has oversight on those funds. At the individual fund level, you will have officials from Global Affairs who will sit to look at the various investments, the financial position of these investment funds, to ensure, again, that investments are made according to the terms and conditions, that the results are achieved and that the funds are used properly. There are various levels of oversight in each of these climate investments that we make.

Senator Pratte: And is that reported back? I know we will be contributing $2.65 billion in the next five years, so, at one point, can we make sure that these $2.65 billion have achieved their stated goals?

Mr. Thangaraj: Yes. For every single investment we make, we have a results framework that we have going into that agreement with whichever fund we choose to use, so we can track all of the financial aspects of it, where the money went, who it went to, but also, at a project-by-project level, what the results are for that individual investment.

So, for example, one of the things that Canada has supported is I Like Nutella. Hazelnuts are grown in various countries, but they're vulnerable to climate change. Through these funds, we support small-scale farmers to adapt their farming practices. We can tell you what the impact of that climate adaptation investment is.

Senator Pratte: I have also a very detailed question, and I'm sure you can't provide the answer today, but maybe you can provide it to the committee through the clerk. I would be very interested in how you select the projects to provide assistance to populations affected by the impacts of El Niño. There is $45 million for that purpose. I'm not a scientist, but I know that what El Niño does is increase the probability of certain extreme meteorological events, but it's very difficult to pinpoint whether this event, in particular, is created by El Niño. I'm wondering how projects or regions are selected.

Mr. Thangaraj: We can get back to you with a more fulsome response. El Niño has had impacts on farming and on access to food, so the agriculture sector and access to food in concentrated geographic areas. For example, Malawi and Ethiopia are two countries that have been most acutely affected. What we do is work with multilateral partners such as the World Food Programme, UNICEF or other organizations such as that to target interventions that would alleviate those situations.

Senator Woo: Thank you for your testimony. I have one question for ESDC and the others for Global Affairs Canada. The first is a quasi-comment. It picks up on the question of student loans, repayment rates, delinquency and so on.

There is a request from two of our colleagues for more information, which you have kindly agreed to collect. When you do collect the information, I think for us to get a fulsome picture, what you probably want to also share with us is comparable delinquency rates in other lending institutions and the collection cost — that's very important — so that we don't get a false picture of the absolute amount of dollars that are wasted or lost to us. For us to come to a proper assessment of whether or not funds are wasted, we need to understand the total picture of loans collection, the system as a whole and what collection costs might entail. That's mostly a comment, but if you would add that to your list.

For Global Affairs, I wanted to ask about the investment Canada hub. You mentioned it in your preamble. It's a very exciting initiative, but it's not part of the supplementary, so presumably that's already part of the Main Estimates, or perhaps it's coming later. Could you clarify that?

Mr. Thangaraj: What we have done is we have done some work to stand up the office in terms of what it would look like. It's not reflected in these estimates, and it won't be until the initiative is fully fleshed out.

Senator Woo: Thank you for that. On the estimates themselves, you have an item on funding to pay Canadians and LES — locally engaged staff — in missions abroad. First of all, let me say how important both the LES and other Canadians working at missions abroad are to Canadian interests abroad. Presumably, this is an incremental amount. Can you tell us what the base amount is? Is that a tough question?

Mr. Thangaraj: The base salary, I don't have that off-hand. I can get that for you.

This amount here is the incremental amount that is a result of currency fluctuations and inflationary pressures. We do have a base envelope for salaries and benefits for those, and they get adjusted depending on the value of the Canadian dollar.

Senator Woo: This is entirely due to currency fluctuations, then?

Mr. Thangaraj: That is correct.

Senator Woo: Oh, dear. Our dollar has fallen a lot.

A clarification or maybe it's a small error, but in your written comments and, I think, in your verbal testimony, you mentioned $133 million to help developing countries address the impact of climate change, but the table shows $130 million. Are we missing $3 million somewhere? Which is the correct figure? It's also reflected in this document here, supplementary estimates, on page 223-24. The amount in our documents is $130 million. Is that correct?

Mr. Thangaraj: That's correct.

Senator Woo: Maybe the testimony should reflect $130 million instead of $133 million.

The Chair: Thank you, senator.

[Translation]

Senator Forest: I have a quick question for you, and then I have another one regarding Global Affairs. With respect to the $178 million for student loans — I raised this yesterday — that also includes interest and arrears.

[English]

The Chair: Is that interest?

Mr. Conrad: Sorry, senator. What is the interest part of the $178 million? We have the breakdown. Between the two, $139 million is the capital, and $39 million, approximately, is the interest.

[Translation]

Senator Forest: I have a question for Global Affairs Canada regarding a much smaller amount, $3.8 million to support Canada's cultural industry abroad. Will that amount be used to reinstate the cultural attaché positions, which were unfortunately cut in the past?

[English]

Mr. Thangaraj: What this funding is for is as a result of Canada's one hundred fiftieth anniversary, birthday. I don't know what the correct term is for it.

Senator Cools: Anniversary of Confederation.

Mr. Thangaraj: We are doing two things through this. It's in partnership with Heritage Canada, which has a domestic aspect.

Internationally, what we are trying to do is promote exports of the cultural sector across the world through our mission network and our trade commissioner services. What we're also doing through this initiative is highlighting various Canadian artists through our missions. There will be events at our missions to do that.

It's a promotion of Canada, and Canada's artists specifically, in the missions for the one hundred fiftieth anniversary. It's a specific initiative.

[Translation]

Senator Forest: So, it is a one-off.

Mr. Thangaraj: Yes, it is a one-off.

Senator Forest: As part of the one hundred fiftieth anniversary. How is it coordinated? Minister Joly already has a presence on the international scene; she was at UNESCO recently. How are the activities related to this budget coordinated with the strategy to promote Canada's heritage and cultural activities abroad?

[English]

Mr. Thangaraj: This initiative here is part of Heritage Canada's estimates as well as ours. Both departments fed into this for both the domestic and the international.

As we go through this year and have these events at our various missions, and as we promote our cultural exports, we work closely with staff at Heritage Canada and the minister to ensure that the overall objectives are met for the promotion of Canada.

[Translation]

Senator Forest: So, if I understand correctly, it is actually related to my last question. The cultural attaché positions that were cut at our foreign missions will not be reinstated.

Mr. Thangaraj: No.

[English]

Senator Cools: I thank the witnesses for coming before us. I am a little amused by the Global Affairs gentleman's use of the feminist lens. Perhaps you can tell me what that means, one of these days. I always have a slight reaction to lenses because, obviously, to my mind, a lens will see something quite different from reality, but that's a story for another day.

The documents here describe your department as the Department of Foreign Affairs, Trade and Development. You here are presented as Global Affairs Canada. Is there a reason why the two names are different? These are the estimates that we're dealing with. They are supposed to be very precise and very accurate, you know? I'm just curious about that.

Mr. Thangaraj: In our enabling legislation, we are the Department of Foreign Affairs, Trade and Development.

Senator Cools: Why is there duplicity of names? It's causing a fair amount of confusion, I want you to know.

Mr. Thangaraj: In 2015, the department was renamed as Global Affairs Canada.

Senator Cools: Right. So it has been unnamed and renamed.

Mr. Thangaraj: At the time of amalgamation between CIDA and Foreign Affairs, the official name, according to the legislation, was the Department of Foreign Affairs, Trade and Development Canada.

Senator Cools: I'm pleased about that, because foreign affairs and foreign relations refer to our foreign relations with other nations, and global affairs means the affairs of the world. I don't think any Canadian minister would be in charge of the affairs of the world, at least not yet. I'm glad that they have settled on the Department of Foreign Affairs. It is much more comfortable, I think.

Mr. Thangaraj: Again, Foreign Affairs is our legal name, according to legislation.

Senator Cools: If you have a statute, that means that they reconstituted the department. Every department has a statute that created it.

Mr. Thangaraj: That is correct.

Senator Cools: There is a Department of Justice, at which Sir John A. Macdonald drafted, by the way, a long time ago, when he was Attorney General. Okay. I should view you, then, as Foreign Affairs?

Mr. Thangaraj: We refer to ourselves as Global Affairs Canada. There was an announcement by the government that we are to be known as Global Affairs Canada.

Senator Cools: My question: I see in vote 1(C) of your Department of Foreign Affairs, Trade and Development, you have an allocation or payment, and it is found on page A6, halfway down the page:

. . . the payment to each member of the Queen's Privy Council for Canada, who is a Minister without Portfolio or minister of state . . .

You would spare me reading it if you could read it to yourselves so that we won't take the time it takes to repeat all the words.

I wonder if you could tell me the quantum, the figure or the amount of money that you are paying out on behalf of that vote in 1(C), because if you notice, there is a total at the head of the page at 1(C), but it's not broken down or itemized in all of these. If you know the quantum of that particular one, you would help me solve a huge puzzle.

Mr. Thangaraj: 1(C) is —

Senator Cools: The reason I'm asking is that it's repeated 15 times.

Mr. Thangaraj: That is correct. In previous pages, correct?

Senator Cools: In previous pages. And also in subsequent pages, because it runs right through to about A-11. I'm very curious about it, because there is something very odd to it.

Mr. Thangaraj: This table is the vote wording that we have for vote 1.

Senator Cools: I know that.

Mr. Thangaraj: This table summarizes that the total request for our operating expenditures is $24 million.

Senator Cools: I know that. Trust me, I have read a lot of supply bills and lots of estimates in the 35 years I've been here.

Mr. Thangaraj: I think I misunderstood your question. My apologies.

Senator Cools: Not to worry. Could you identify or extricate from that total this amount that I raised, the question of these payments to the members of the Privy Council? I'm curious about what you call the Queen's Privy Council for Canada, because the Queen's Privy Council for Canada is made up of hundreds of people. I get the impression that here you're talking about cabinet. If you're not talking about cabinet, then you're talking about the PCO.

Mr. Thangaraj: Right.

Senator Cools: Can you clarify that for me?

Mr. Thangaraj: I will clarify that for you in writing, but to my knowledge, when I go through the supplementary estimates, there is nothing specific for the Privy Council. I will confirm that for you in writing.

The Chair: Give that to our clerk.

Senator Cools: I appreciate that.

Senator Neufeld: Thank you. For Global Affairs Canada, a number of my questions have been asked, but based on the $2.65 billion to tackle climate change over five years, that would say that about $500 million has been spent this past year. Then you go on to say: "We are committed to measuring our performance and communicating these results to Canadians, ensuring our efforts are having the greatest positive impact."

Can you tell me where I would find where you are communicating that to Canadians so that I can have a look-see to see what has been done with about $500 million?

Mr. Thangaraj: We can do that. Some of that would be contained in our Departmental Performance Report, where will we articulate various results that we have.

As part of each of these investments, we do have a performance measurement strategy that will articulate the results in terms of, for example, specific measures on greenhouse gas reduction or other measures. If you want them for those individual funds, we can get those for you, but in terms of reporting against the $2.65 billion, we do that as part of our Departmental Performance Report.

Senator Neufeld: And you'll help me a little bit, to direct me to where I find that?

Mr. Thangaraj: Yes.

Senator Neufeld: Thank you.

Also, on the bottom of page 224, there is reinvestment of revenues from the sale or transfer of real property in the amount of $5 million. Did you sell some property? And what did you reinvest that money in?

Mr. Thangaraj: Regarding the $5 million, there is a direct fund for the sale and disposal of real property. Because our department holds a significant amount of real property, we will sell. For example, a few years ago, we sold properties in London. What we did was we used those proceeds to build our new chancery. We will engage in the sale or disposal, but also reinvestment, so there is a fund within the fiscal framework. We call it our proceeds of sale account. What we will do is we will draw on those as required. So the request that you see in these supplementary estimates is to draw that amount for operational maintenance for our capital properties.

Senator Neufeld: Okay. You said that money could go to operations or capital. If you sold a capital asset, you might take that and put it into operations.

Mr. Thangaraj: You may do a capital lease. The intention of this fund is also to make sure that our properties don't fall into disrepair and we don't get into deferred maintenance. We will use these on rare occasions to fund maintenance-type projects.

Senator Neufeld: Thank you.

I have a question for Mr. Perlman, if I may, regarding the $4.8 million requested for the new Student Work Integrated Learning Program. That's on page 6 of your notes, and I go to page 7 and you say there is a program for $1 million worth of funding related to the Student Work Integrated Learning Program. I assume that's the same thing. Is that in addition to the $4.8 million?

Mr. Perlman: Yes, it is. The $4.8 million is the contribution amount that goes to the recipients, and the $1 million that I'm speaking about is for internal operations to get the program up and running and to then process the remainder of the program, which is $73 million.

Senator Neufeld: Okay. And advertising programs, at $2.5 million. Can you tell me how you're doing that?

Mr. Perlman: Yes, I can. The advertising program was to promote our services predominantly to youth, just to ensure that people are using the services that are out there, such as the Canada Student Loans and the Canada Summer Jobs Program, and so that everyone is aware of the programs that are out there to help Canadians.

Senator Neufeld: I understand that's what it's for. Tell me how it's done.

Mr. Perlman: Oh, how it's done.

Senator Neufeld: Where would I find it? Where would I see some advertising or something that says to students, "This is here. This is where you can go to get this." Where do you advertise that?

Mr. Perlman: I think I have that. It's the Helping Young Canadians Succeed advertising program. It has been on radio and television for the last month or so, I guess. We risk-managed a little bit to get the program up and running. For example, for the Canada Summer Jobs Program, there was a big push in which you would have heard a lot of radio ads going across the country and advertising providers through Public Services and Procurement Canada.

Senator Neufeld: I'm not aware of it. I had not heard it. I come from a rural part of British Columbia. Usually, what they say is they advertise, but it hits the large media and not the smaller media.

Mr. Perlman: It's a combination of various cross-country media sources as well as some social media.

Senator Neufeld: Could you send me where it was advertised in British Columbia?

Mr. Perlman: We can do that.

Senator Neufeld: In British Columbia?

Mr. Perlman: Yes.

Senator Neufeld: One final question: It's on the transfer of $6 million to the administrative tribunals for the Old Age Security. Is there something going on in Old Age Security or is that just normal?

Mr. Perlman: It's $600,000.

Senator Neufeld: Okay, $600,000; sorry.

Mr. Perlman: It has to do with volumes of appeals. Because they are hearing Old Age Security appeals on our behalf, and since the volume has gone up, we're compensating them to ensure that they are processing these in a reasonable time frame.

Senator Neufeld: So there is no problem going on with people getting their Old Age Security. Is that what you're telling me?

Mr. Perlman: That's not the reason behind it. It's because of normal volume.

[Translation]

Senator Mockler: My question is further to Senator Neufeld's. Are these increases related to the aging of Canada's population?

Mr. Perlman: I think there is an increase in the number of people receiving benefits.

Senator Mockler: Is that related to the aging of our population?

Mr. Perlman: Yes.

Senator Mockler: Could you provide more details about the $1.4 million going towards the Old Age Security Service Improvement Strategy? Which programs are specifically included in this strategy?

Mr. Perlman: Yes.

[English]

The Chair: Would one paragraph on the objective and framework help you, senator?

Mr. Perlman: Would you prefer that as a follow up? Or can I speak quickly to that?

The Chair: You don't need to rush through it now, but it would be nice to have. Follow up if you can.

Mr. Perlman: If it helps, we have been investing in improving services to seniors. One example is automatic enrollment. We are trying to alleviate the need for seniors to have to do a lot of complex work themselves. So for example, one of the things done recently was the whole auto enrollment strategy, eliminating the need for about 50 per cent of Canadian seniors from having to apply for their benefits. So as they are reaching the appropriate age, they could receive that.

What we're doing with the new funds is rolling it out also for the Guaranteed Income Supplement benefit by December 2017. It's the same kind of thing. We're trying to modernize our systems and make things easier for our seniors to apply and receive the benefits that they deserve.

[Translation]

Senator Mockler: I would like to follow up on one of Senator Forest's questions regarding the $3.789 million allocated for Canada's cultural industry abroad. Could you tell us which countries will benefit from these funds and indicate each country's level of participation in the Organisation internationale de La Francophonie?

[English]

Mr. Thangaraj: We will respond to that in writing.

The Chair: For Global Affairs, we have large amounts of funding for humanitarian services. A question that we have asked throughout the years — and it's a simple question — is, would you be able to take your top three grants for humanitarian aid and give us written confirmation as to what percentage of each dollar actually gets through as aid to the people affected? Would that be possible?

Mr. Thangaraj: Yes, we can. We'll provide you a list. On the humanitarian side, we work with trusted partners, the UN agencies. We work with them closely.

The Chair: Do you do that as standard practice to track your dollars to make sure the highest percentage possible gets through to the people?

Mr. Thangaraj: We do. That's part of the reason we work with multilateral organizations or organizations such as the societies of the Red Cross. It's because we know that aid gets through. They have mechanisms to minimize corruption and all of those important things when you're delivering assistance. They have the logistical capacity to do it in terms of transport, et cetera.

The Chair: If you could give us the top three, it would be great. It helps us when we're asking the questions in terms of our motivation.

I would like to thank the panel for your testimony.

To continue our examination of the expenditures set out in the Supplementary Estimates (C) for the fiscal year ending March 31, 2017, we now have before us, from National Defence and the Canadian Armed Forces, Patrick Finn, Assistant Deputy Minister, Materiel; Brigadier-General Werner Liedtke, Deputy Chief Financial Officer, Director General, Financial Management; and Brigadier-General M.A. Frank, Director General, Defence Force Planning; from Veterans Affairs, Elizabeth Stuart, Assistant Deputy Minister, Chief Financial Officer and Corporate Services; and Faith McIntyre, Director General, Policy and Research Division. Where are our people from the RCMP? Dennis, you were hiding when I saw you.

Dennis Watters, Acting Chief Financial Administration Officer, Royal Canadian Mounted Police: No, I've been here.

The Chair: I didn't have a chance to shake your hand, so that means you like to go quietly through the situations.

Mr. Watters: No, not at all.

The Chair: Acting Chief Financial Administration Officer. Each organization will make a brief opening statement, and we will be honoured to ask you questions.

Brigadier-General Werner Liedtke, Deputy Chief Financial Officer, Director General, Financial Management, National Defence and the Canadian Armed Forces: Thank you very much, Mr. Chair and senators, for the invitation to present the Supplementary Estimates (C) for the 2016-17 fiscal year on behalf of the Department of National Defence and the Canadian Armed Forces.

It is always an honour to meet with distinguished members and colleagues before committee. Today I am joined by Patrick Finn, Assistant Deputy Minister, Materiel; and Brigadier-General Martin Frank, Director General, Defence Force Planning.

[Translation]

The focus of National Defence and the Canadian Armed Forces remains on our three enduring roles: protecting Canada's interests at home and abroad, defending North America, and contributing to international peace and security. Defence continues to conduct missions as part of a whole-of-government approach to defending Canada's interests and keeping Canadians safe and secure. These estimates reflect that focus and put defence dollars where they are needed most.

[English]

Turning to the Supplementary Estimates (C), I would like to highlight key points for the committee on page 2-34 in both the English and French versions. The bottom line for National Defence resulting from the supplementary estimates is an addition of $28.9 million in funding. This funding comprises an increase in funding of $29.5 million, reduced by net transfers of $0.6 million to other government organizations.

[Translation]

The majority of this increase in spending authority for 2016-17 consists of $28.5 million for Operation REASSURANCE to address Canada's contribution to NATO assurance measures and deterrence posture in Central and Eastern Europe; $1.0 million relating to the Canadian Armed Forces Recruitment Advertising Campaign; and $18.8 thousand related to reinvestment of revenues from the sale or transfer of real property.

Mr. Chair, the Department of National Defence and the Canadian Armed Forces continue to maintain strong fiscal responsibility and careful stewardship of resources in recognition of the fiscal environment in which we are operating.

[English]

The Department of National Defence and the Canadian Armed Forces have carefully monitored all votes to better align spending with departmental priorities and activities as year-end approaches. This is intended to achieve two goals: first, that unnecessary requests within votes for additional funding are avoided; second, that the department achieves targeted planned lapses and to reduce the probability of residual lapses.

Consequently, the department has proposed an internal vote transfer of budgetary authorities to support departmental operations. This would be achieved by transferring $48.2 million into vote 1 operating from vote 5 capital, $39 million; and vote 10 grants and contributions, $9.2 million.

We would be pleased to hear the committee's thoughts and to answer any questions.

Elizabeth Stuart, Assistant Deputy Minister, Chief Financial Officer and Corporate Services, Veterans Affairs Canada: Good afternoon, Mr. Chair, vice chair, committee members. It is a pleasure to be here today. I look forward to discussing Veterans Affairs' 2016-17 Supplementary Estimates (C) submission.

My name is Elizabeth Stuart. I am the Assistant Deputy Minister, Chief Financial Officer and Corporate Services for Veterans Affairs Canada. I am with Faith McIntyre, who is Director General, Policy and Research Division within the strategic policy and commemoration branch.

Honourable senators, as you know, the department is responsible for providing benefits and programs to veterans, Canadian Armed Forces personnel and their families in recognition of their service to Canada; and ensuring their achievements and sacrifices are honoured and remembered through commemorative activities.

Mr. Chair, committee members, the department is proud of this dual mandate. It is proud to do everything in its power to enhance the programs and services that are important to Canada's veterans and their families.

As you have seen from this 2016-17 Supplementary Estimates (C) submission, VAC's overall budget this fiscal year, including these supplementary estimates, is slightly over $3.9 billion. When compared to our existing budget, that is an increase of $134.8 million, or 3.6 per cent.

[Translation]

As these supplementary estimates show, our first priority is to make sure veterans and their families have the support they need — when they need it, and for as long as they need it. For the younger veterans, this often means ensuring that they are able to successfully transition to civilian life.

The majority of this new funding — $132.3 million — is for veterans programs and services, much of which flows to Canadian Armed Forces veterans through the New Veterans Charter. This is a direct result of the demand-driven nature of VAC's programs which tend to fluctuate from year to year based on veterans' needs and entitlements.

[English]

Each summer, Veterans Affairs Canada prepares an update to its client and expenditure forecast, which forms the basis for requests for increased funding. The latest client and expenditure forecast shows a forecast increase in the number of Canadian Armed Forces veterans accessing Veterans Affairs Canada's benefits and services, as evidenced by an increase in the number of applications for benefits and services. In addition, Veterans Affairs Canada is making improvements to processing disability applications. Each of these factors leads to increased spending requirements.

For this year, Veterans Affairs Canada has requested and received additional program funding, primarily for disability awards, earnings loss benefits, the Veterans Independence Program, War Veterans Allowance the Family Caregiver Relief Benefit and Canadian Forces Income Support.

[Translation]

There is also $2.5 million to develop advertising programs to highlight commemoration activities to ensure that the memory of our veterans' efforts and sacrifices will not die with them, and that an appreciation of the values they fought for will live on in all Canadians.

[English]

VAC builds sufficient flexibility into its forecast to ensure that all veterans who come forward seeking benefits receive the benefits to which they are entitled. However, expenses are only incurred for the veterans who actually come forward qualifying for our programs and services. As Veterans Affairs Canada's program budgets can only be used for the purpose for which they were intended, excess funds cannot be redirected for other purposes without explicit consent from Treasury Board.

[Translation]

This reality has led to past criticism in the media around "lapsed funds," i.e., not spending our entire budget. This is primarily attributed to the declining number of veterans we are supporting. For example, we are forecasting a net decrease of about 9,100 war-service veterans and survivors who are receiving VAC benefits this fiscal. This is the single largest reason for the lapses in overall spending.

VAC is working hard to ensure that all veterans are treated with care, compassion, and respect.

[English]

Our top priority is to provide veterans with excellent service from their first moment of contact with our department. We place veterans at the centre of everything we do — our philosophies, our ideas and our operations. We continue to work closely with the Department of National Defence to make sure we fully support our Canadian Armed Forces members to make an easier transition to civilian life and focus on their well-being.

In closing, I would like to point out that in this year, as in previous years, approximately 90 per cent of Veterans Affairs Canada's current budget, or $3.5 billion, will flow directly to veterans, their families and the other Canadians served by Veterans Affairs Canada.

[Translation]

Thank you, Mr. Chair. Faith and I would now be happy to answer any questions that you or other committee members may have about any part of the Supplementary Estimates (C).

Mr. Watters: My name is Dennis Watters and I am the acting Chief Financial Administrative Officer for the Royal Canadian Mounted Police. I would like to thank you for this opportunity to appear before you this afternoon to discuss the RCMP's 2016-17 Supplementary Estimates (C). If you allow me, I will take a few moments to provide some background information on the RCMP that may be of help to better relate to what these supplementary estimates contain.

The RCMP has a complex and multifaceted mandate to provide federal, provincial, territorial, municipal and international policing services. As we look at the current situation, the RCMP is facing new challenges driven by increasing concerns around terrorism and extremism, cybercrime, drugs and organized crime, as well as rapid technological advances and increased demand on policing resources.

[English]

On the international stage, the RCMP works to further Canada's global peace and security agenda by cooperating with and supporting the international law enforcement community, thereby ensuring that both the Canadian and the global community are safer. In addition, we actively participate in multiple peacekeeping missions, as well as providing support to nations at risk and building their law enforcement capacity.

As Canada's federal police force, we provide general law enforcement activities at all levels of government by upholding the laws of Canada and the laws in force in any province or territory. The RCMP contributes to our national security through a number of mandates and responsibilities, including national security criminal investigations, protective policing, border integrity, and drugs and organized crime, to name a few.

The RCMP also delivers services under 162 provincial and municipal contracts covering eight provinces and the three territories, as well as most of their respective municipalities, excluding larger municipalities that normally provide their own police service: for example, Vancouver, Edmonton and Toronto.

Additionally, the RCMP provides First Nations policing services through 133 tripartite agreements.

The RCMP discharges its mandate by managing activities under three main service lines: contract policing, federal policing and specialized policing services, with a focus on five key strategic priorities, which include: reducing the threat and impact of serious and organized crime; countering criminal threats to Canada's national security; countering threats to Canada's economic integrity by disrupting the flow of financial support to organized crime; contributing to safer and healthier indigenous communities; and initiatives to support the prevention of youth crime and victimization.

The RCMP's overall spending authority for the 2016-17 Main Estimates was $4.7 billion, which is a combination of $2.8 billion in federal authorities and $1.8 billion in re-spendable revenues.

With the additional funding provided prior to supplementary estimates and transfers from the Treasury Board Secretariat centrally held votes, total year-to-date authorities for the RCMP prior to these estimates are $3 billion, plus re-spendable revenues of $1.9 billion.

The RCMP is seeking an increase of $93.4 million in spending authorities in the 2016-17 Supplementary Estimates (C). This amount consists of an increase of $91 million in new voted appropriation; an increase of $1 million resulting from transfers from other departments; and $600,000 related to employee benefit plans.

A major component of the supplementary estimates is a funding of $70 million related to maintaining overall RCMP operations pending the implementation of the results of a comprehensive resourcing review that is ongoing. A resourcing review was launched in August 2016 in order to assess the financial integrity issues faced by the RCMP and serve as the basis for longer-term strategic recommendations to the Minister of Public Safety and Emergency Preparedness. A final report is expected to be completed by the end of March 2017.

This funding will be placed in a frozen allotment and the RCMP will reassess the amount of funding required prior to year-end and request only the amount required to be released from the frozen allotment.

Other major components include funding of $6.4 million to replace the RCMP's national forensic laboratory services facility in Vancouver, B.C., with a new facility at the new headquarters in Surrey, B.C. as announced in Budget 2016; $5.7 million for incremental costs associated with the security operation for the North American leaders' summit that took place in Ottawa in June of 2016; and an increase of $5 million for the grant to members of the RCMP for injuries received in the performance of their duties. The purpose of this grant is to provide members of the RCMP and their families with financial security in the event our members are injured as a consequence of their duties and prevented from continuing to provide service to the Crown. These benefits are provided for life.

A further increase in funding of $2.2 million is to support the implementation of the 2014 legislative amendment to the DNA Identification Act. This funding is to be used to establish and maintain five new DNA-based indices to assist in the investigation of missing persons and the identification of found human remains, and to offer further support to criminal investigations.

Finally, funding of $1.6 million is for the security infrastructure of the Rideau Cottage official residence. The RCMP, in cooperation with the National Capital Commission, will undertake a series of capital improvements to Rideau Cottage to address urgent security upgrades for the property.

That said, it will now be my pleasure to answer your questions in regard to these supplementary estimates. Thank you.

The Chair: Thank you for your presentations. Let's start off with Senator Neufeld from British Columbia.

Senator Neufeld: I will ask my first question to the RCMP. On the second page, you say the RCMP provides First Nations policing services through 133 tripartite agreements. Does that cover all First Nations? It doesn't cover all First Nations across Canada, does it? Maybe help me a little bit about that.

Mr. Watters: I don't know if it covers all First Nations, but it covers a significant portion of them. That I know. With the First Nations policing program, we have entered into some agreements to provide policing services, but I'd have to come back to confirm officially if it covers all of them.

Senator Neufeld: There are over 600 bands. That's why I ask.

The Chair: Six hundred forty is the exact number, so if you could get back to us, I think that would be helpful, just to clarify.

Senator Neufeld: Second, recruitment. Unless I missed it, I don't think you talked about recruitment. I understand there are some problems in recruitment. Would I be correct in saying that? If so, what's happening to rectify the problem?

Mr. Watters: Recruitment is a challenge for the RCMP. We do have some vacancies that we are trying to currently fill. To help us meet our recruiting targets, we have made a few changes to the recruiting process, which include certain steps that were being taken that we decided to remove. There were certain tests, like a physical test that could be done later on in the process, to try to expedite the number of people going through at depot, the academy. I don't have the exact numbers, but I know since some of these measures have been put in place, the numbers of applicants has increased.

Senator Neufeld: The applicants.

Mr. Watters: The number of applicants. We're trying to get as many applicants, and the objective of the RCMP in the very near future — at the depot academy in Regina, we're operating about 34 troops. A troop contains, I believe, 32 individuals. We're trying to augment that to about 40 troops within the next year and a half or so.

Senator Neufeld: Okay, and so that's meeting your needs?

Mr. Watters: We might have to increase even further down the road in order to address our vacancy patterns, to bring it down to an even lower level.

Senator Neufeld: Thank you. My next question is for National Defence. I'm going back to 2013. There was a defence renewal initiative put forward to look at defence spending and see where you could have a goal of saving some $750 million to $1.2 billion by 2017-18 and reinvest that in higher priorities. Is that taking place? Is it still ongoing? How is that working out and what are the investments?

Brig.-Gen. Liedtke: In actual fact, our defence renewal initiative does continue to go. To date, we have reinvested within the department in the neighbourhood of $400 to $500 million, and the work continues to remain ongoing.

Senator Neufeld: So the target was $750 to $1.2 billion by 2017-18.

Brig.-Gen. Liedtke: Exactly, and the estimated savings under defence renewal were meant to be a combination of efficiency savings and effectiveness savings. So the efficiency savings is the number I quoted you, which is what we can reinvest, but the others are efficiencies that we have done that we have quantified, but it doesn't equate to an actual amount of money.

For example, we would develop new processes on how to do our maintenance function. What we have done is we made our technicians more efficient and effective, and they have actually been able to do more repairs. In that sense, there's no money to redistribute, but we have benefited from the value of their work by having more vehicles or equipment serviceable.

Senator Neufeld: Is there a report given to someone that would outline the things that have been done since 2013?

Brig.-Gen. Liedtke: Yes, sir. We do an annual report, and we can come back to you with our latest report with the latest results, if you would like.

Senator Neufeld: Thank you.

The Chair: It would be helpful, if you could get that to our clerk.

Senator Woo: Thank you for your testimony. I have one question for each of the three departments, starting with National Defence.

I'm interested to see the additional spending on the NATO exercise and just wanted to get a bit of background on when this additional spending was planned, particularly in relation to the U.S. election cycle, and also if you could give us some sense of what Canada's contribution to NATO as a result of this incremental spending would look like, relative to other NATO members.

Brig.-Gen. Liedtke: I can answer the question with respect to the supplementary estimates. We're requesting $28.5 million in order to augment the new mission to support NATO, which is focused on NATO reassurance measures and joint cost-share. Canada will take a leading role as a framework nation and will be in command of a multinational brigade, of which we will have a land task force of approximately 455 people. We will also have a Royal Canadian Navy frigate working on a persistent rotational basis. We will also have an air task force, which would be six F-18s that on a periodic basis would do air policing within Europe, as well as conduct ongoing training exercises.

With respect to your question of when this happened, this decision was taken in July of 2016, the new extended mission, so this was planned and under way well before the election. If you would like, I can go through exactly what the $28.5 million would be used for.

Senator Woo: No, I don't think that's necessary, but the other question on Canada's relative contribution to NATO compared to other NATO members, given this additional spending amount?

Brig.-Gen. Liedtke: Right now Canada is the sixth-largest contributor of 28 NATO nations. We fund approximately 6.6 of the NATO common funded budget, which equates to approximately $180 million per year.

Senator Woo: Have we been the sixth-largest for a long time? Has this position changed at all?

Brig.-Gen. Liedtke: No, I don't believe so, sir.

Senator Woo: Thank you very much.

If I may move to my second question, for Veterans Affairs, I want to ask about the forecasting model for what you call demand-driven services.

I ask the question because you've brought up the issue of lapsed amounts from previous years, and what you've requested is contingent, presumably, on a certain model that you have in your department about what the demand will be for these multi-faceted services. Could you tell us a little bit about what that model is? How do you go about projecting? There have been mistakes in the past, obviously, where the number of veterans who no longer need these services dropped out of the system. That's why there were so many funds left over. Has the forecasting model changed or improved since that time so that you've got greater confidence in the amount that you're requesting?

Ms. Stuart: Annually, Veterans Affairs Canada undertakes a client re-evaluation. We work very closely with the Office of the Superintendent of Financial Institutions, specifically the Office of the Chief Actuary. Together with those professionals, who have very high standards, we seek to better understand over a span of several decades — up to six decades — what the future veteran client intake and profile might be. Extensive data is collected. We work closely with National Defence on this. It's an annual valuation exercise.

I do not believe the models have evolved extensively, but we are in discussions now with the Office of the Chief Actuary regarding several different possible models to use in the future. Our models are essentially event-driven in that once a veteran or a Canadian Forces member becomes entitled to and eligible for a benefit, that is called the event. We can see situations in which veterans have more than one entitlement to a benefit of our service. All of this is taken into account when we do our forecasts.

We have authorities to spend that are based on event-driven models. The technical term for this is quasi-stat. It is solely driven by the forecasts for the clients. We receive monies only for the purpose for which they are allowed to be expended. I can assure you that whether we have 10 veterans or 10,000 veterans, every veteran who is entitled to a benefit and eligible for it will receive it.

Senator Woo: Absolutely. If I could seek further elaboration on the so-called "lapsed funds problem," was it a problem in the sense of the failure of the forecasting model or a failure of the media to understand what was really happening here?

Ms. Stuart: I believe neither. When we undertake our forecasts, we would generally err to the conservative side to make sure that we have enough. With these special allotments, if the funds are not expended, they go back into the government's coffers — the fiscal framework. Then the process starts again every year.

Senator Woo: You're just being conservative, essentially.

Ms. Stuart: Yes.

Senator Woo: Finally, for the RCMP, regarding the reference to the resourcing review and this idea of setting aside $70 million, which will not actually be drawn on until the review is done, at which time the actual amount will be determined, I'm interested to learn more about that. What would happen to any amounts that are not requested, if it's not $70 million?

Mr. Watters: Last year, we went to the government in Budget 2016 and, based on some forecasts for this fiscal year; we had asked for about $79 million. This year, we went in based on our forecasts as we get closer to the year-end, and we said, "We believe we will only need about $70 million of that." We determined this based on some earlier forecasts.

However, as we advance in the year, if we feel that we're not going to need the full $70 million — for example, some expenditures won't materialize throughout the year, so if we decide at the end, we only need $50 million of that $70 million, we will call in $50 million. The balance remains with the fiscal framework. We will just call in what we need. We're calling it in later to make sure we are more accurate.

Essentially, as a result of that, we won't be lapsing any money this year, because anything that we lapse that is $70 million and below has to go back to the fiscal framework, because that's the money we're asking.

It's important to point out is that a few years ago, we had a plan to implement some cuts, and we were asked not to implement the cuts. We're providing this level of funding to maintain operations. Until the resourcing review is completed, the idea is to be getting interim integrity funding. When the report is released, we'll give up an action plan to resourcing review and we'll provide that to Minister Goodale, who will go to cabinet. Then we'll determine what our needs are, and there will be a strategy for the longer-term sustainability of the RCMP.

Senator Pratte: I would like to follow up on a couple of those points. First of all, with the RCMP, I'm not as brilliant as my colleague so I will need a bit more explanation on this $70 million to try to understand exactly how this is going to work.

You have a budget for the year, and you presumably know pretty well how much money you are going to need until the end of the year. When you come near the end of the year, you have a pretty good idea how much you're going to need to finish the year — to the million, you should know.

Mr. Watters: Yes.

Senator Pratte: I don't understand why you would ask for $70 million and think that maybe you're going to need only $50, $40 or $60 million of it. So there is something I don't understand. Please explain.

Mr. Watters: Yes. During last year, when we were preparing for our mains, or the money we needed to go forward this year, we were asked to maintain operations at the level we were in 2015. In order for that to happen, we said we're going to need integrity money to help us maintain that operation, because we were asked not to implement some of our cuts. We determined at the time that we'd need approximately $79 million to make it through this fiscal year. That was before the fiscal year started. It was $79.3 million, I believe.

We put the ask, and it was supported. Within our budget at the beginning of the year, we distributed that $79 million to whoever would need it to maintain operations. As we progressed and the closer you get to the end of the year, you have a better idea of where you're going to land. We determined approximately in the December time frame, I believe, that we're not going to need all of the $79 million that we had projected we would need the year before. So we said, "We believe we'll be okay at $70 million." Where we think we might be okay is at $70 million for this year to finish the year.

Now, as things progress, the reason we did it like that is to say, "We're going to call the money in." If we find that maybe some of our forecasted expenditures are not materializing, we're not going to need that full $70 million, so we're just going to ask for whatever we need to finish the year and not blow our budget. Whatever we don't call in goes back to the government into the fiscal framework. For example, if we call in $50 million and we end up lapsing $50 million, that $50 million has to be given back to the fiscal framework.

Senator Pratte: Give me an example of what could vary by, let's say, $20 million.

Mr. Watters: For example, we were projecting that the pay raises agreements for the public servants would be signed this year, so we had to put an amount in there for that, if that was going to materialize. But if the collective agreements are not signed by March 31, then there is $20 million of that we're not going to need. We will give it back to the fiscal framework.

Senator Pratte: I have a question for National Defence on Operation REASSURANCE. I understand the logic of the operation and the geopolitics of it. I just wonder at one point whether there is an analysis of whether the purpose of such an operation is attained, because there is obviously a lot of money. I don't know what the total budget of Canada's contribution to Operation REASSURANCE is, but maybe you could provide that to us. I wonder at one point whether there is a moment where the government says, "Okay, we will have spent say $100 million into this. We're really glad, and this was really worth it." Or is this simply our contribution to NATO and we know that NATO is worth it, and that's it.

Brig.-Gen Liedtke: I'll answer the question related to how much funding has been expended this year, and I'll defer the operational aspects to my colleague, General Frank.

In 2016-17, we are currently planning to spend a total of $91.9 million against Op REASSURANCE. So we are asking for the $28.5 million but the rest is being internally funded.

Brigadier-General M. A. Frank, Director General, Defence Force Planning, National Defence and the Canadian Armed Forces: From an operational perspective, I will highlight some of the key elements of that forward-deployed battle group that will be going into Latvia. We are one of four of these multinational battle groups that will be forward-deployed into Eastern Europe. Germany is leading one, the United States is leading one, the United Kingdom is leading one and Canada is as well.

These battle groups, the four of them deployed in Eastern Europe, provide a very clear signal to the world on the strength of the alliance. But as well, from Canada's perspective, it sends a really clear signal of how much Canada values and wants to support its NATO mandates, NATO commitments. This is a fantastic way to be able to demonstrate that.

[Translation]

Patrick Finn, Assistant Deputy Minister, Materiel, National Defence and the Canadian Armed Forces: Indeed, we review all of these missions on a cyclical basis, within government and within NATO. If you look, you will see that we have been involved in that operation over the years, and that it is reviewed by the government. The department makes efforts and conducts analyses involving intelligence and impact. These files are reviewed cyclically, at NDHQ and at NATO, to determine where we should focus our efforts in order to achieve the greatest impact.

Senator Forest: As this time, we know that our neighbour to the south wants our participation to total 2 per cent of our GDP. Our participation currently totals 0.99 per cent, or almost 1 per cent. Germany's participation totals 1.2 per cent. The Prime Minister tells us that Canada's contribution to NATO goes well beyond simple investments or expenditures.

I want to know how we can say that, in general, we play a sizeable role in NATO.

[English]

Brig.-Gen Liedtke: I agree with the sense of what you're saying. We need to look at our contribution to NATO to be in addition to the monetary aspects, and it's my understanding that the government is looking at that part of the discussion as they approach NATO.

[Translation]

Mr. Finn: We're reviewing the calculation, and our colleague is still studying it. The calculation method varies from country to country. For some countries, the RCMP and Coast Guard equivalents are included. In other countries, the veterans' pensions are included. We must look at the calculation method to know where we stand. In general, and we told your colleague this earlier, as the sixth-largest contributor in the form of money and leadership, we're very highly regarded. As my colleague said, for the missions in Eastern Europe, we're one of the countries that sends battalions.

I have a position at NATO that I hold on a secondary basis. I can tell you that, in general, Canada is very well received. Canada is in high demand as a supplier of troops and capacities, as a result of the professionalism of its military personnel.

Senator Forest: Under the current circumstances, the criteria for assessing participation, for comparison purposes, must be consistent from country to country, given the evolving global dynamic. I'm sure those of you at NATO agree that we must be able to compare the participation of each NATO member on equal terms. If not, the data doesn't hold water.

Concerning our fleet of Victoria class submarines, I read an article that concerned me and that was published in a very credible media outlet. It mentioned length of use, but also the fact that, out of four submarines, I think three are serviceable. One of them is currently broken down. What's the situation and what's your level of satisfaction? It's a major financial investment for Canada. How would you assess the situation?

Mr. Finn: Thank you for the question. First, I'm a former navy member and submariner. Therefore, I may be a bit biased, but I'll try to answer your question.

In some periods, three submarines are in service. The same is true for our surface fleet. In certain cases, the service period is only a few weeks. The submarine returns for crew training and maintenance purposes. One of the four submarines is still undergoing long-term maintenance. It's in dry dock and must be completely dismantled. One of them is currently in a service period, as you described, for a few weeks before returning to sea. HMCS Chicoutimi is currently at sea, in training, before being deployed for operations.

I think this fleet's acquisition cost of less than $1 billion is very low for four submarines. It would be very annoying to have to repurchase four submarines of this type, and the cost may amount to $10 billion. Admittedly, once the submarines have been put into service, we have a great deal of difficulty with spare parts, among other things. However, things are progressing in certain areas. In terms of maintenance, we've experienced welding, labour and other issues. That said, things are starting to come to fruition and the maintenance periods are beginning to become less frequent.

Are we satisfied? I would say no. However, we're starting to see more and more periods in which two or three submarines are at sea.

Senator Forest: Thank you for diving into the subject.

Senator Mockler: My questions are for the RCMP representative. First, congratulations on your work in New Brunswick. I also want to acknowledge your work in New Brunswick's small communities.

Mr. Watters: Thank you.

Senator Mockler: My question is the following. In one of the categories of table 16, which was submitted to us, you indicate $8.3 million in operating expenditures and $11.4 million in capital expenditures, for a total of $19 million. You also mention "frozen allotments for Supplementary Estimates."

Can you tell us more about this and where in Canada the amounts are being allocated?

Mr. Watters: Our infrastructure program included expenditures that we can't incur this year. The amount was around $8 million. We'll carry it over to future years, because we weren't able to start the projects on time.

Senator Mockler: Mr. Watters, can you tell us where the projects will be implemented?

Mr. Watters: Yes, I have that data.

Senator Mockler: Or else, could you provide the information later?

Mr. Watters: I have the information here. For the Canada Infrastructure Program projects, we received $63 million over a two-year period. One of the projects is in Regina. It's a shooting range that we'll be renovating. In Montreal, an amount is set aside for redundant infrastructure. Unless I'm mistaken, it's a small project involving a generator. The other project is at the depot division. We must do a great deal of infrastructure work there. I don't have the specific amounts for each project. There's another project in Regina. It's a shooting range simulator where people can train or practise shooting at any time.

For all these projects, we received $63 million over a two-year period. However, we weren't able to start certain projects on time, and $8 million will be carried over to next year.

The $7.8 million represents the government's savings. It cut $7.8 million from the RCMP's budget for business expenses and travel costs. In other words, the amount will be cut from our budget.

Senator Mockler: From your operating budget?

Mr. Watters: Yes.

Senator Pate: Can you tell us more about the $11.4 million in capital expenditures? I think it's the same thing, but can you provide a breakdown for each RCMP region?

Mr. Watters: I don't have the information at this time.

Senator Mockler: Do you have the information on New Brunswick?

Mr. Watters: I don't have the information today, Senator Mockler. I could certainly provide it to you shortly.

The Chair: Please send the information to our clerk.

Senator Mockler: I want you to provide the information on northwestern New Brunswick, in particular with regard to the infrastructure being completed in the Saint-Léonard region of New Brunswick.

Mr. Watters: It's a detachment. Yes, absolutely.

The Chair: Thank you, Senator. Are there any other questions?

[English]

I'd like to thank our witnesses.

[Translation]

I want to thank the witnesses for attending our meeting today. See you soon!

(The committee adjourned.)

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