Proceedings of the Standing Senate Committee on
Issue 2 - Evidence - November 27, 2013
OTTAWA, Wednesday, November 27, 2013
The Standing Senate Committee on National Finance met this day at 6:47
p.m. to study Supplementary Estimates (B) for the fiscal year ending March
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, this evening, we are continuing
our study of Supplementary Estimates (B) for the fiscal year ending March
We are pleased to welcome a number of officials this evening. They will
help us with their estimates for their departments, and we're dealing with
the supplementary estimates. If you need to refer back to the Main Estimates
from which these flow, then make that point. Primarily we're focusing on the
supplementary estimates this evening.
From Aboriginal Affairs and Northern Development Canada, we welcome Mr.
Michael Wernick, Deputy Minister; and Susan MacGowan, Chief Financial
We've met you before, and it's good to have you back. Thank you.
From Public Safety Canada, we welcome Mr. Mark Perlman, Chief Financial
Officer and Assistant Deputy Minister, Corporate Management Branch; Shawn
Tupper, Assistant Deputy Minister, Emergency Management and Regional
Operations; and Dave Neville, Senior Director, Financial Assistance
Programs, Emergency Management and Regional Operations.
I would ask each department to give us a brief opening statement that
will help put matters in perspective.
I let honourable senators know that with respect to Indian Affairs and
Northern Development in your supplementary estimates, that's at page 2-51.
When we're dealing with Indian Affairs and Northern Development, that's the
estimate that we'll be focusing on. With respect to Public Safety Canada and
Emergency Preparedness, 2-82, both in the English version, and if somebody
could help me with the French version.
What page is it in the French version?
Senator Hervieux-Payette: It starts on page 2-6.
The Chair: We will begin with Indian Affairs and Northern
Development and then continue with Public Safety. Does that meet with your
Michael Wernick, Deputy Minister, Aboriginal Affairs and Northern
Development Canada: Thank you, Mr. Chair, for the opportunity to discuss
Supplementary Estimates (B).
I have been here in previous years and I certainly take my
responsibilities as accounting officer for the department quite seriously.
This time of year I will be appearing at several committees explaining the
I think in the interest of letting you ask questions, I'm going to race
through, be very brief and walk through what's in this particular batch of
supplementary estimates. You will know from previous years that my
department is a fairly heavy user of Supplementary Estimates (A), (B) and
(C) most years. A lot of decisions are made in the federal budget, which are
then appropriated through supplementary estimates later in the year.
So what you'll find in this particular batch this year are a number of
important decisions. The total amount is about $600 million, and the largest
amount that would have caught your eye is the funding associated with the
negotiation and settlement of specific claims. These are, as many senators
are familiar with, breaches of lawful obligation by the federal government,
usually to First Nations, and we've been actively involved in negotiation
and settlement of those claims.
The current government put in place a new approach in 2007, which
includes acceleration of the negotiation process and the creation of an
independent tribunal able to arbitrate claims and make awards.
The largest amount in the supplementary estimates, as associated with the
renewal of that initiative, was started in 2007. Five years later the
initiative had to be renewed, and having successfully renewed it you now see
the appropriation in supplementary estimates. About $450 million of that
amount is actually a topping up of a specific claims settlement fund which
is a provision for the offers and awards from the negotiating process and
awards made by the tribunal. The remaining $20 million is the actual cost of
the legal research and negotiating process associated with this.
It is the view of the government and our effort, wherever possible, to
negotiate settlements of these unresolved historic issues and legal
obligations of the government. These are an important source of
reconciliation, economic opportunity and financial resources for the
communities with which we reach settlements. I am happy to take any
questions on those.
In a similar vein you will find $61 million for out-of-court settlements,
which is a mechanism government uses to manage and resolve litigation. There
are four significant cases in this year's bundle where we were able to
negotiate settlements of litigation that was under way, and the funds are
appropriated for the payment pursuant to those settlements.
Some of the smaller but quite significant items you would have seen in
the recent Speech from the Throne include a renewed commitment to reaffirm
the commitment to assure that jobs and opportunities emerging from Canada's
natural wealth are available to all Canadians, including the new generations
of Aboriginal people coming on stream.
You will see an appropriation in there of $20.6 million, which is
associated with the government's reform of income assistance, which we've
launched this year. This is the first year of the major reform, so the $20.6
million is for us to put in place a case management approach, which has
never been there for dealing with income assistance recipients on- reserve
to target the young adult population, particularly 18- to 24-year-olds, and
divert them from income assistance into training and education and skills
programs. We work closely with colleagues from Employment and Social
Development Canada. This is the first year of significant income assistance
reform and part of an overall package of more than $240 million appropriated
in the last budget.
Small, but also important, you will see a line item for a $5-million
contribution to the Indspire organization. You may know it better as the
National Aboriginal Achievement Foundation; it rebranded about a year ago.
The funds were provided in the last budget to allow Indspire to increase the
range of scholarships and bursaries to First Nations and Inuit students. The
second instalment will be made available next year if Indspire is able to
raise matching contributions from other sources.
The Chair: Could you refer to the supplementary estimates and just
point that out to us?
Mr. Wernick: Sure. Indspire is actually in the statutory amount,
and I'm told the reason for that is that it made its way in the budget
implementation act, which made it a statutory appropriation, as opposed to
Gs and Cs.
The Chair: Okay. Is there an explanation of that? So the number
I'm looking at is $6 million?
Mr. Wernick: The $6.1 million is the statutory; $5 million of that
would be the money that has been provided to Indspire. The residual of $1.1
million is a sort of topping up of employee benefit plan amounts that are
associated with some of our operations, and for some reason those are
statutory and rolled into the statutory appropriations.
The Chair: We understand that with respect to the supply bill that
comes from these estimates we do not vote on the statutory, but the same
committee is dealing with budget implementation, so we may come at you from
that point of view as well.
Mr. Wernick: Fair enough.
The Chair: When you started talking about $5 million, I couldn't
see where that was, but it's hidden in the $6.1 million.
Mr. Wernick: That's correct.
The Chair: It's helpful if you could tell us that up front.
Mr. Wernick: Okay.
Lastly, the supplementary estimates now before this committee address the
Canadian High Arctic Research Station. As most committee members will know,
the research station will be a world-class facility on the cutting edge of
The station, to be built in Cambridge Bay, Nunavut, will be a focal point
for research, building partnerships and strengthening innovation and
economic growth in Canada's north.
So $2.6 million included in supplementary estimates is about the
pre-construction phase, purchase and shipping mobilization of materials, and
site work on the site, which has been identified; and construction will be
under way in 2014 with an opening date planned for 2017.
I think those are the highlights. In our supplementary estimates, there
are always a number of small transactions, transfers where we're doing
partnerships with other departments where money moves back and forth between
departments. There are small adjustments pursuant to various small accounts
that Treasury Board keeps as a special allotment, and there are small
adjustments to those. Rather than go through them, I am happy to take any
questions committee members may have.
The Chair: Could you explain the available authorities vote 1b?
It's a bracket item.
Mr. Wernick: That is the technique that Treasury Board used
essentially to ensure a reduction in travel expenses by the department, so
it's a frozen allotment from my point of view, money out of reach to the
department, and it will lapse.
The Chair: We had voted that for you previously, but then there
was a government —
Mr. Wernick: That's correct. The money would have been in the Main
Estimates, and then subsequent to that there was another initiative to
restrain travel expenditures, so that money has been frozen. It is not
available to the department.
The Chair: My understanding is that, then, can then be applied to
Mr. Wernick: No.
The Chair: That's what this is doing here.
Mr. Wernick: It's reduced the amount that we need to ask for in
terms of an appropriation by Parliament.
The Chair: I'm just looking at the figure at page 2-51, halfway
down the page, under Budgetary, the final portions of Voted Appropriations,
and it comes to a figure of $591 million.
Mr. Wernick: That's correct.
The Chair: That was with a reduction of $1.1 million, which was
the available authority that had earlier been approved for something that
then became not possible to spend for so it can be applied for other things,
but it needs our authority to do it. That's my understanding.
Mr. Wernick: I believe you're correct, and it just means that
instead of asking Parliament for $592 million, we ask for $591 million.
The Chair: Yes, and don't travel.
Mr. Wernick: And don't travel as much.
The Chair: Yes, that's right. Before we go to questions, and I
have a good number of senators who have questions for you, I think we will
go to Public Safety first.
Mr. Perlman, you can give your presentation and then we can have
questions. When the questions are posed, we will see if they're directed to
one or the other. Thank you.
Mark Perlman, Chief Financial Officer and Assistant Deputy Minister,
Corporate Management Branch, Public Safety Canada: Honourable senators,
I am pleased to be here on behalf of Public Safety Canada. In Supplementary
Estimates (B), Public Safety Canada is requesting a net increase of $688.9
As you mentioned at the beginning, that's on page 2-82 on the English,
and 2-97 in French.
The Chair: Thank you.
Mr. Perlman: We arrive at the total through the following
breakdown: a requested funding increase of $714 million, reduced by a
requested transfer of authorities of $25.1 million.
First, allow me to explain that the funding increase, all of which is
related to Public Safety's vote 5 spending, is in the grants and
Through Supplementary Estimates (B), we are requesting funding approval
under the Disaster Financial Assistance Arrangements program, the DFAA. This
is a cost-sharing program, for which $100 million is set aside annually,
that helps provinces and territories cover exceptional costs of natural
disasters that they cannot reasonably be expected to pay for themselves.
This request includes funding of $689 million, the bulk of which — $500
million, based on initial estimates from the Province of Alberta — will
allow us to provide Alberta with an advance payment to offset recovery costs
from historic flooding that occurred in June.
The remaining amounts include $75 million in funding related to 2011
flooding in Saskatchewan; $9 million for 2011 flooding in Alberta; and $5
million for 2012 flooding in New Brunswick. There is $100 million to
accelerate the cash flow for payments to the Province of Manitoba, which
continues to recover from the severe floods of 2011.
Supplementary Estimates (B) also include an increase of $25 million for
disaster response and recovery costs, in order for Public Safety Canada to
follow through on the government's commitment to provide financial
assistance for Lac-Mégantic.
As you may know, those costs are ineligible under the Disaster Financial
Assistance Arrangements, which only cover natural events.
It should also be noted that these estimates do not include a further
funding of up to $95 million to assist in related decontamination efforts,
which the Prime Minister announced last week. These will be included as part
of future estimates.
The Chair: Is that the Lac-Mégantic, the additional amount?
Mr. Perlman: That was the Lac-Mégantic. That was announced on
November 21 by the Prime Minister, and we're working through the mechanics
on that, so it will be in future estimates.
The Chair: We will probably see that in Supplementary Estimates
Mr. Perlman: We're still working through that, so you may.
The Chair: Maybe next year?
Mr. Perlman: Maybe next year. We're still working through it.
I am moving now to our request to transfer funds out of government
departments, which, as I mentioned, amounts to a total decrease of $25.1
million to the department's authorities.
We're requesting a transfer of $25 million to the Royal Canadian Mounted
Police for the federal share of policing costs for their services in some
First Nation and Inuit communities across Canada.
The First Nations Policing Program, the FNPP, helps to ensure
professional, dedicated and responsive policing services in approximately
400 First Nation and Inuit communities across Canada.
Finally, we're requesting a transfer of $98,000 to the Social Sciences
and Humanities Research Council as part of our memorandum of understanding
to support Kanishka-related projects through the Insight Grants program.
The Kanishka Project is a $10-million five-year research initiative to
better equip Canadian policy-makers and operators to fight terrorism and
radicalization leading to violence.
In summary, these funding requests will allow Public Safety Canada to
continue our important work, while ensuring we are using Canadian taxpayers'
money in a cost-effective manner.
Thank you very much for your time. I would be pleased to answer any
questions you may have.
The Chair: Thank you. Your supplementary estimates that appear at
page 2-82 and 2-83 sort of tell the whole story. It's not as complicated as
some of the others, so it's good to have you here to help us through these,
and we are able to follow your presentation.
I will now begin with honourable senators who have indicated an interest.
Senators, again, would you identify to which department you're posing your
question, if it is appropriate to do so.
Senator Callbeck: Thank you very much for coming this evening. My
question is to Aboriginal Affairs and Northern Development.
You mentioned the specific claims settlement fund. That was set up, I
believe, in 2007. Is the process working well, and are First Nations
satisfied with it? I would like your comment on that first.
Mr. Wernick: It certainly would be my view that the process is
working well. What was in place before was essentially an out-of-court
settlement model that was bogged down. Virtually no settlements were
happening whatsoever; there were very long processes for getting legal
opinions on the validity of the claim and slow negotiating processes that
had no particular incentive to conclude.
We've seen enormous progress since that. The existence of the tribunal at
the end of the process is an incentive both to First Nations' lawyers and to
the government lawyers to see how good their case is and to negotiate
We've seen the backlog in legal research essentially melt away to
virtually nothing. We've actively put a lot of offers out on the table. Not
everybody is happy with the offers because I think they may have been
expecting more in terms of offers in settlement, so in a number of places we
are in the back and forth of negotiation. The pace of settlement is
accelerating, and we have reached some truly large settlements, big
historical issues in Alberta, Ontario and other places.
I think there are still some thorny ones left to do, but some of the
bigger ones have actually been settled in the last few years, so it's an
enormous improvement on what was there before. But there is still work ahead
Senator Callbeck: Roughly how many claims have been settled since
Mr. Wernick: I have that for you. We have a website where all of
that is updated quarterly, and you can check the progress on every single
claim filed. Part of the initiative is full transparency about the process.
The national number on our website, and this is current to this month, is
that we're at the table in active negotiation on 175; we've settled 383
through negotiations; and then there are other places where we have deemed
there was no lawful obligation and we have essentially rejected the claim.
Access to the tribunal is still there, of course, if somebody thinks they
have a good case.
Senator Callbeck: So 383 — you say 175. Is that roughly, then, the
backlog at the end of March in 2013?
Mr. Wernick: There really isn't a backlog.
Senator Callbeck: There is no backlog.
Mr. Wernick: Well, it depends what you call a backlog. We still
have legal analysis and legal opinions on strength of claim going at 32 of
the claims that we're aware of; 44 are still in historical research because
people are going into issues that may be from some time ago. We're actively
at the table with 175 of them — offers are going back and forth. So there
isn't really a backlog unless some of the cases involve deeper historical
research. We may be dealing with issues that go back to the 1700s in some
Senator Callbeck: Okay, thank you. Was that my time or do I have
The Chair: You go ahead.
Senator Callbeck: The other question I wanted to ask about is the
$61 million out-of-court settlements. You said there were four. Could you
briefly comment on what the four were?
Mr. Wernick: There's always an inventory of litigation. People can
file a statement of claim against the Crown very cheaply and very easily.
Our litigation inventory, which the Department of Justice manages, is over
1,000 cases, not all of which are active. Someone is essentially filing a
statement of claim in order to get a negotiation going. The number of active
cases is much smaller than that.
When the Department of Justice feels settlement is appropriate, then we
do try to reach settlement to save everybody time, cost and effort. In this
particular case, four significant settlements are accounted for in these
appropriations. They vary, but they usually involve some sort of breach in
the past. One of them is with the Sawridge First Nation and has to do with a
dispute about interest earnings on oil and gas royalties. One is with the
Alexander First Nation in Alberta, which has to do with the management of
trust funds and revenues. There is one with two communities in northern
Ontario that has to do with shortfalls in land they were promised and
flooding caused by a hydro project years ago. Then there is a batch of
plaintiffs in Quebec that has to do with day schools in the province, where
15 plaintiffs reached settlements.
Every batch will be different, but we've had some success in negotiating
out-of-court settlements and sparing people lengthy trials.
Senator Buth: My first question is for Mr. Wernick for Aboriginal
Affairs and Northern Development. In terms of the claims, can you give me
some background? Do claims still continue to come in, or do you expect that
most of the First Nations will have submitted claims?
Mr. Wernick: People can still file claims. We do not think there
will be large numbers from now on, and they're probably getting a little bit
weaker in the case that's being made — but that's a bit speculative on my
part. But most of the known historical grievances that had to do with the
railways going through, canals being built, land being taken for military
bases and so on are very well known; they've been around for many years.
They were subject to the process under previous governments, which was the
Indian Claims Commission, which could only make non-binding recommendations
and so on. There are a couple of big ones that you would be familiar with,
like the one in Kahnawake, Quebec, which led to Oka and so on.
So it's very unlikely that people will find a lot of new material for
claims, but I can't rule it out, because there are people out there
burrowing away in archives and documents, and it's possible new claims will
Senator Buth: Do you have any outstanding claims in Manitoba?
Mr. Wernick: Yes, we do. Many of the claims in Manitoba have to do
with treaty land entitlements in the sense that, as people went through and
signed what are now called the numbered treaties out West, promises were
made that a certain amount of land would be made available and, sadly, we
still haven't met all those commitments in Manitoba and Saskatchewan.
Senator Buth: I have a last question for you. With the recent
Supreme Court decision in the Metis land right claim in the Red River
Valley, do you have any information on how that will impact Aboriginal
Affairs and Northern Development Canada — where that is at, even in the
process of the discussions over that?
Mr. Wernick: There are two issues that kind of overlap, and I hope
I'm going to get this right. One is the specific issue that's being raised
by the Red River Metis in Manitoba and the Manitoba Métis Federation Inc.
v. Canada decision. And then we have the CAP/Daniels decision,
which is about whether non-status people and Metis should be considered
federal under BNA Act section 91.24.
Both of those could have very significant impacts in terms of our
responsibilities for programs, services, lands and so on. It is creating
some issues about overlapping assertions between First Nations people and
Metis people, and I think we will all have to find ways for those to be
Senator Buth: Thank you. Do I have any further time?
The Chair: Want me to put you down for round two?
Senator Buth: Oh, I don't know. How much time did Senator Callbeck
The Chair: Just about the same amount of time as you had.
Senator Buth: Just checking, chair.
The Chair: This is ``Hey, I want my time.'' But I will put you
down in round two, in second place.
Senator Buth: Thank you very much, chair.
Senator Eaton: The clock's going, but I am your favourite, so
you'll give me extra time.
Mr. Wernick, we seem to spend so much money in Canada on northern
affairs, and yet there seems to be so much dissatisfaction. Could you tell
me: We're giving $20.6 million to case management systems. Is there any kind
of accountability? You come up with the money. Is it followed all the way
through to make sure that it actually goes to where you're directing it?
Mr. Wernick: Yes, there is an accountability framework for the
There are two comments I can make on that. The model we've been relying
on a lot is one of funding agreements, where you sign an agreement with a
recipient, you send money through the contribution agreement and they sent
you reports on what they did with the money. That's the tool we've relied on
most for the past 30 years.
Senator Eaton: And we're not changing that?
Mr. Wernick: Well, that is one tool, and it does create a lot of
reporting, which I am sure you've heard about from the Auditor General.
Every time there is an interest in an issue, we tend to ask for reporting
from the recipients.
What the government did — which I think is a game changer — was pass the
First Nations Financial Transparency Act last year, which is a much simpler
proposition. It says, ``Thou shalt prepare a financial statement to the CICA
standards, and thou shalt publish it,'' so that your members can see it.
That was passed earlier this year and comes into full effect with financial
statements for next fiscal year. So next summer, you will start to see the
Web populated with audited financial statements of all of the First Nations.
That's not so they can report to me but so they can report to their own
Senator Eaton: No, and I think that's a very good thing. For
instance, I am thinking of Attawapiskat, again, which blew up again the
other day. And I think, ``Oh my God. We're giving them money and the
situation reoccurs every fall somewhat,'' whether it's flooding or fires in
the houses that we're not providing.
To move on, the $5-million contribution to Indspire to provide
post-secondary scholarships — again, is there a system or is that money — is
there a distribution system? Indspire said to you, ``This is the way we're
going to manage it, and this is how kids are going to compete for it,'' or
is it all kind of laid out?
Mr. Wernick: Indspire is an independent, arm's-length organization
on the foundation model with its own board, governance and transparency. We
have a contribution agreement with them that said, ``You're getting an extra
$5 million for these purposes,'' and they'll report to us what they did with
Senator Eaton: I often sit on boards that ask government and
foundations for money, and usually you have to go and tell people exactly
how that money's going to be distributed.
Mr. Wernick: Well, we do not want to be in that kind of
micromanagement business. Indspire is an extremely well- run organization
with a good track record, and that's why they were given extra money in the
budget, which was not an easy budget to get extra money from.
Senator Eaton: That's fine. You've answered my question. May I ask
a quick question, Mr. Perlman?
Mr. Perlman, educate me: the Kanishka Project — $10 million over five
years. Is this the same — when we were talking about Lac-Mégantic, you said
you only cover natural events, so the $95 million for decontamination will
come from somewhere else.
When you talk about terrorism in the Kanishka Project, is that to cover —
so that's not going to be natural events, obviously?
Mr. Perlman: No. The natural event is what I'm talking about — the
DFAA. That's where I am talking about natural events. I believe a question
was asked on Monday when Bill Matthews was here. It was asking about whether
Lac-Mégantic fell under the DFAA, so I just wanted to make sure I had that
covered and have that open.
But we do have multiple programs within the department, and the Kanishka
Project is just one of them.
Senator Eaton: Can you tell us a bit more about it?
Mr. Perlman: I can. This particular Supplementary Estimates (B),
the transfer we're doing is actually for an Insight Grants project, and it's
going to the University of Laval. The project is about mapping and analyzing
extreme right networks in Canada. It is to inform, to do various research
projects, and to ensure we have a better awareness.
Senator Eaton: It's more of an intelligence project?
Mr. Perlman: It is absolutely that.
Shawn Tupper, Assistant Deputy Minister, Emergency Management and
Regional Operations, Public Safety Canada: Kanishka was directly related
to the government's response to Air India; there was a proposal in the Air
India report that this responds to. It was about doing research into
terrorism and radicalization of youth, which helps us address the kinds of
things that led up to Air India.
This program is geared to academic research to give us better
intelligence about what's going on in our communities that speaks to issues
Senator Eaton: It sounds interesting.
Mr. Tupper: It's really interesting. That's quite different than
the work we do responding to man-made and natural disasters. The difference
there is that the DFAA is exclusively focused on natural disasters and our
responses to and recovery from natural disasters. Lac-Mégantic was not a
natural disaster; it was a man-made disaster, so we had to develop a
different funding mechanism to flow money to Quebec for those purposes.
Senator Eaton: If Kanishka found terrorist activity, that would
fall under a different fund to clean that up?
Mr. Tupper: Yes.
Senator Hervieux-Payette: Mr. Wernick, I was still under the
impression that what you refer to as ``claims'' were land claims. All such
Aboriginal matters seem to be referred to as ``claims''. In normal life,
they are not called ``claims.'' To my mind, ``land claims'' makes it clear
we are talking strictly about Aboriginal communities, but why do you say
``claims'' when referring to funding to build schools, provide health
services and so forth? I would think there are programs for that.
Mr. Wernick: Yes, absolutely.
Senator Hervieux-Payette: Why did you say that was part of the
Mr. Wernick: That is not what I said. There may have been a
misunderstanding. There is a program for the negotiation of claims. That is
one of the functions the department performs, but we have thirty or so
programs that fund the services delivered to First Nations communities. That
covers primary, secondary and post-secondary education, social assistance
Senator Hervieux-Payette: They are not ``claims''? You do not call
Mr. Wernick: No, absolutely not. The department's estimates exceed
$8 billion, and I believe $5 billion of it is for programs delivered to
residents on Aboriginal reserves.
Senator Hervieux-Payette: On page 5 of your brief, you say that
. . .all Canadians, regardless of where they live — north or south,
on and off reserve — should be able to fully participate in a strong
How will Aboriginals participate in a strong Canadian economy? Will they
receive training? How will that take shape? Are you going to select a
certain number of young people? Practically speaking, what does it mean?
Mr. Wernick: As I tried to explain, it is the first step towards
reforming on-reserve social assistance, an initiative we undertook a few
months ago. The social assistance program that we fund for Aboriginals
living on-reserve is completely outdated. Every province has made tough
decisions in reforming its program, including Quebec. Before collecting a
cheque under a passive income support program, recipients have to register
for a training or education program, if possible. Obviously, some clients
are not able to do that.
Now, for the first time, we have tried to implement active programs, as
the provinces did 10 years ago, in cooperation with the other department.
The idea is to start with young adults, to prevent those between 18 and 20
years old from passively collecting social assistance. This is the first
year of a reform that was fairly difficult for most provinces to put in
Senator Hervieux-Payette: Has it been well-received? Access to
training also has to be available.
Mr. Wernick: It has been very well-received by most of the chiefs
and regional organizations, especially tribal councils out west. Everyone
living in Saskatchewan, Manitoba and even northern Quebec is very aware of
the economic growth happening in natural resource industries. Infrastructure
is being built. Entrants to the workforce now have access to opportunities
that never existed before, and young people want to take advantage of them.
I am certainly not pessimistic. I know there are communities like the one
the senator identified; there is no question that they exist, but the vast
majority of chiefs and councils are actively looking for economic
development, investment in their communities, how to participate in mining,
oil and gas, infrastructure, LNG. The main theme I run into is economic
Senator Hervieux-Payette: I would like to know who assesses
disaster damage so you can figure out how much you are going to give. The
victims are people, the victim is the community. How do you conduct the
assessment before sending out the cheque? Back during the ice storm in
Quebec, I can remember private insurance companies handing out cheques on
the spot with the media in tow.
In the long term, what steps do you follow, and what role does the
government play in assessing the damage?
Mr. Tupper: For our program, we work very closely with the
provinces and territories. The basis of our approach to recovery from
disasters is that you best start on the ground in the local community, and
basically we escalate as we move forward. So we rely on municipalities and
the provinces to be the responders and to develop the recovery plan.
It is based on provincial programming that payments are made out to
individuals in communities and work is done with municipalities. We then
work with the province based on a submission of receipts, essentially, about
what their expenditures have been. We weigh them against eligibility for our
programs. We do an audit of their expenditures, and it's against that that
Senator Hervieux-Payette: And what about private insurance
Mr. Tupper: Our programs only cover expenditures that are
non-insurable. We have an expectation that people carry insurance, and even
if they do not, if it is insurable, it is not eligible under our
Senator Bellemare: My questions have to do with the social
assistance program for Aboriginals. In Supplementary Estimates (B), you are
allocating $20.6 million for case-management systems. How much is the social
assistance budget in total, and how many people does it cover?
Mr. Wernick: Both very good questions. The most recent figures I
saw were from last year. Social assistance is an $865-million program, so
nearly a billion dollars.
Senator Bellemare: For all Aboriginal communities?
Mr. Wernick: That is for all communities in Canada, and the growth
rate is staggering because of a baby boom in the communities. There are an
increasing number of young adults in the communities, and that is the
problem. I even have the figures. Taking into account family members of
primary recipients, the figure for last year was about 90,000 people out of
a population of 500,000.
The actual rate is around 30 per cent, but it varies from community to
community, depending on the economic conditions. There are some communities
where none of the residents are on social assistance, and others, where more
than 60 per cent of the population uses the program.
Senator Bellemare: I think encouraging young people to take
advantage of active employment measures is fantastic. I support it 200 per
cent. Are there any partnerships with the provinces as far as training is
I would think you have agreements involving the local community, the
provincial government and the federal government. Is that correct?
Mr. Wernick: The ideal model is what we call the tripartite
approach, a partnership between the federal government, the province or
territory and an Aboriginal authority, either the local community government
or a regional council. It works wonderfully. For the rest of Canadians, the
provinces or local social agencies provide most of those services. Their
services can be purchased or rented. That is the model we are working
towards, instead of having a bunch of federal public servants providing
Senator Bellemare: I have one last question on the topic. It has
to do with active measures. Is there much in the way of training measures,
or are wage subsidies also available to employers? Do you have mechanisms
that tie in with employment, or do you provide more general training in the
Mr. Wernick: That is precisely the purpose of the estimates. We
have to start with a case management system in order to assess each
individual. In some cases, the need will be fairly easy to fill. The
individual might need a driver's licence or technical training, and if there
is a mine in the region, for example, we could direct the person to the
mine. That is what the provinces have done. In each case, an assessment
needs to be done, and the appropriate services need to be identified and,
then, provided. What we learned from the provinces was the importance of
having a direct relationship with the private sector and employers, and we
are trying to follow that kind of model.
Senator Bellemare: That would be wonderful. Have you been
following that model for a few years now?
Mr. Wernick: No, we have never used that model for those who live
on-reserve. The provinces were very hesitant to serve on-reserve clients.
Even some Aboriginal governments and councils were a bit worried about being
passed from the federal government to the provinces.
We are now looking for active partnerships. We are in the early stages of
the reform. Next year, I hope to come back with specific examples.
Senator Bellemare: That is fascinating. It could be worth keeping
a close eye on, because it may be possible to draw lessons that apply to
other client groups as well.
Senator Chaput: Senator Bellemare asked the first question I had.
I am very interested in the income assistance program and I am eager to hear
what you have to say next year, to see where you are in the program.
My other question pertains to the $25-million transfer to the RCMP for
the federal share of policing costs for RCMP services. That money is being
transferred to the RCMP, but what department is it coming out of? Is it from
Aboriginal Affairs and Northern Development Canada?
Mr. Perlman: Public Safety Canada.
Senator Chaput: So Aboriginal Affairs and Northern Development
Canada does not have any expenditures tied to policing services in First
Mr. Tupper: No. I am also responsible for that program. It comes
under the authority of Public Safety Canada because it involves policing.
Everything having to do with policing was given to our department. It used
to be the responsibility of Aboriginal Affairs and Northern Development
Canada prior to 1991, but this year, it was transferred to us.
The transfer to the RCMP is simply our purchase of service from the RCMP
to supply additional policing services to certain communities. Within that
program, we buy police services from the RCMP in some cases, and, in other
cases, we have Aboriginal police services that are established and that
exist in the communities.
Senator Chaput: And that's still going on?
Mr. Tupper: That still continues.
Mr. Wernick: If it helps, Mr. Chair, you can think of our
department as providing roughly three quarters of the services delivered to
Aboriginal communities. But we do have other major partners, such as Health
Canada, the housing corporation and Public Safety Canada.
Senator Chaput: Your department provides three quarters of the
services, the other quarter comes from other departments, depending on the
Mr. Wernick: Yes, exactly. Our second biggest partner is Health
Canada, which provides health care services.
The Chair: Mr. Perlman, is this $25 million equivalent to what a
municipality would pay to the RCMP to cover their share of RCMP policing in
Mr. Tupper: The costing that we pay to the RCMP is exactly the
same costing as is paid to RCMP officers captured under the provincial
police agreements, so it is simply a transfer of our funding to buy
services. It increases, by about 500 police officers, the contingent of the
Senator L. Smith: Mr. Perlman, just a simple question: You have
$100 million for an emergency fund, if I understand correctly.
Mr. Perlman: We have set aside $100 million aside in the framework
Senator L. Smith: For catastrophes?
Mr. Perlman: Yes.
Senator L. Smith: If you look at the past five years, how much
have you spent for emergencies? If there is $100 million for catastrophes,
I'm just thinking, as a business guy, wouldn't you set a higher number,
especially with the way that the environment has changed and the fact that
we're going to have more storms and natural disasters? Wouldn't you, sort of
from a planning perspective, set a bigger number?
Mr. Tupper: Indeed, this is the guy who can give you all the
specifics of the numbers. In general, we have already started to identify
within our ministry, and in terms of advice we're giving to the government,
the need to look again at the levels that we have set for that funding, but
also to make other kinds of investments. So that $100 million is our
baseline investment, which is our response to disasters, and it facilitates
recovery. We also need now to look at investments in mitigation measures
that allow us to front-end some of those expenditures and reduce the
long-term expenditure because we will have a positive impact on how we have
to move to recovery.
Indeed, you're quite right; over the last decade we have seen quite a
rise in the expenditures that we have with respect to payments related to
recovery. We are starting to look at how we can better predict those costs.
Of course, it's very difficult to predict natural disasters, but we are
endeavouring to do a better job at being able to smooth out how we finance
and flow funding against those disasters.
Senator L. Smith: You understand why I ask the question because
it's simple. If you have a small number, and, for five years, you have had
these massive emergencies or catastrophes, you sort of wonder, as a layman,
what kind of planning is taking place. It's not a criticism; it's more an
open-ended question to see where your minds are at.
Mr. Tupper: I think it is a very fair question. Part of why it's
been five years is because we have to look at trends and build an evidence
base to really make sure we understand what's going on and how we see that
growth in expenditure. I think we now have that data, and so we will be
giving advice with respect to how we might flatten out and smooth out the
flow of funding against this program.
Senator L. Smith: Mr. Wernick, I think I asked you the question
last year about the claims settled and claims in negotiation, so, for
clarity, there are 383 claims settled and 175 claims in negotiation. Now, I
asked my confrere, who showed me a graph from your website, showing that you
have over 70 or 75 per cent of your claims settled. Is that land claims that
are part of the 383 plus the 175 that give you that 70, 75 per cent? You had
mentioned that there are 32 other claims and 44 historical claims that are
not necessarily claims yet but cases that could be claims.
Where are you exactly? How much money have you spent over the last
decade? You must have a running total. Of those 32 and maybe 44 that could
be on the books, Kahnawake is in the area where I ran. The chief showed me
the map and said, ``We've been here for 300 years, and we can wait for
longer.'' He drove me around the whole seigneury and all these little towns.
He said, ``This is where your people live now. My people don't live there.
We want to be compensated.'' Are the claims that may not even on the books
yet the biggest ones? Where are we? We have 70, 75 per cent of claims on the
books now settled, and, of the claims that could be out there, is there any
estimate or guesstimate as to what this could mean in terms of planning for
Mr. Wernick: To start with the last part: Yes, we are required to
make a provision. That is a little bit like your last question. We have to
go through a process with the Department of Justice Canada and the
Department of Finance Canada for provisioning for potential awards and
That used to be aggregated all across government; it's now attributed to
each department. Our financial statement includes statements of assets and
liabilities and so on. And there is a contingent liability associated with
litigation and specific claims. I can get the numbers for you, but it's
something in the order of $4 billion or $5 billion. That's always
probability of a settlement and probability of a court awarding a judgment
multiplied by what that number might be.
Senator L. Smith: Would that be for these 32, plus potentially 44
Mr. Wernick: It would include the inventory we have that the
Department of Justice recognizes as a claim. And they will have to make a
judgment call about probability of an award or settlement in the fiscal
framework that you're provisioning for.
So, yes, there's a very rigorous methodology, and it's overseen by the
Comptroller General and the Auditor General, and the Auditor General has
made observations from time to time about whether we are under- or over-
provisioning for those. It is carefully managed.
We just try to negotiate settlements where we can, and you will see those
come to you as appropriations.
To answer your question properly, I'd have to decide what start year to
go with. What I can tell you is that since we reset the policy in 2007, we
have settled 100 claims and paid out over $2 billion. Some of them are $300
million plus and some are $50,000. It would depend on the claim.
Senator L. Smith: We're just talking claims, because —
Mr. Wernick: These are specific claims. I'm not trying to be
confusing, I hope, but specific claims are a lawful breach of obligation by
the Crown. So it usually involved unlawfully taking land away that should
have been held; we had fiduciary and trust responsibilities we didn't
uphold. There are other claims that have to do with alleged mismanagement of
trust funds, in that monies are set aside for use by the band and they were
mismanaged; the band didn't get the full economic value out of them that
they should have.
They are sort of land and money issues.
The standard that my Department of Justice lawyer friends have to reach
is ``was there a breach of lawful obligation or not?'' and if there was,
then we try to settle or negotiate. And sometimes our legal advice is
``no;'' either the evidence isn't there or the breach wasn't one that we
would try to settle on.
As I think I said in my other answer, we've steadily chipped away at that
inventory. It is possible new claims would be filed. There is a peculiarity
— just to end with the most complicated part. Mohawk communities will not
participate in specific claims processes.
Senator L. Smith: Why?
Mr. Wernick: They have their own view of their sovereignty within
Canada, and they won't submit themselves to a federal tribunal. The only way
to settle claims with the Mohawk communities is through direct negotiation.
Senator L. Smith: With the Metis, has that prospective claim — or
I'm not sure where it's at — that arose 18 or 24 months ago been qualified
as a legitimate claim?
Mr. Wernick: That will not be a specific claim. I think it will
end up, at some point — and this is a decision the government hasn't taken —
as a direct negotiation of some sort of settlement with the Manitoba Metis.
But we don't have the mandate or the parameters for that.
I think it's fair to say we're still trying to figure out the full
implications of the judgment. It would have a huge bearing on the Province
of Manitoba, the City of Winnipeg and other property interests. I think the
Manitoba Metis Federation probably has some idea of what they think a
settlement would be, but I don't have a mandate to negotiate that yet.
Senator L. Smith: It looks like you may have a great career
opportunity to work for a long time.
Mr. Wernick: Well, I've already been in this job for —
Senator L. Smith: We will have to move the retirement age up from
67 to maybe 70.
Mr. Wernick: It is a huge issue, as the senator flagged. It is a
big to-do. The Metis issues are coming from the courts and from the growing
The Chair: Mr. Perlman, I have a follow-up question to the
discussion we had regarding Lac-Mégantic, the train derailment and
subsequent explosion. There is $25 million and that's in here — that you
indicated when we talked earlier that was the earlier commitment by the
government. There's another one that will come later. With respect to that
$25 million, we haven't voted on it yet, but has any money flowed out of
some other program or in anticipation, or are we waiting for us to vote
before any of this money goes to Lac-Mégantic?
Mr. Perlman: None of this money has flowed as of yet.
The Chair: Has any money gone from the federal government that you
are aware of?
Mr. Perlman: There is another $35 million as part of the economic
development of Quebec.
Mr. Tupper: The original announcement by the government
immediately at the time of the explosion was that my department would
receive $25 million, which could flow immediately to Quebec to assist with
the recovery. And $35 million was provided to the economic development of
Quebec to, again, facilitate the economic recovery of the community. We are
in the midst of negotiating with the province now the terms and conditions
for that transfer.
The $95 million announced by the Prime Minister recently will be
supplemental to my department, and it will also facilitate with recovery; it
will focus on decontamination related to the environmental damage caused by
The Chair: Before any money will flow, there is a need for some
sort of a negotiated document between the province and the federal
Mr. Tupper: That's what we're endeavouring to do now.
The Chair: That has not been done yet, so no money has gone from
the federal government to Lac-Mégantic until now?
Mr. Tupper: That's correct.
The Chair: I'm into round two. We have very little time left, but
I promised I would let you get your questions on record.
Senator Callbeck: This is for Public Safety. You're asking for an
increase here of $689 million; the bulk, $500 million, is going to go to
Alberta, based on initial estimates. What were the initial estimates?
Dave Neville, Senior Director, Financial Assistance Programs,
Emergency Management and Regional Operations, Public Safety Canada: The
initial estimates provided by the province are about $3.1 billion, of which
we figure the federal share would be $2.8 billion. We have notionally set
aside $500 million here as a possible first payment to the Province of
Alberta. And we're working with officials right now with the province to be
able to put together the documentation needed for an auditor to go in and do
a quick check and substantiate that amount.
So that first payment would be just that: a first payment towards the
overall federal share.
Senator Callbeck: The flood was in June? How long does Alberta
have to get in their final estimate?
Mr. Neville: It was. The way the guidelines are set up now is
that, for the typical disaster, we ask that the final claim be submitted
within five years, recognizing that, following a disaster, it's the province
that's providing the assistance to those directly affected and we're just
reimbursing the province after the fact.
The guidelines stipulate that we want to see the final claim within five
years. The Province of Alberta, in this particular event, has already told
us there is no way they will be finished within five years, so we are able
to make an extension — we can extend that timeline at the province's
request. They've already identified it will be well beyond five years.
Senator Callbeck: And the feds generally pay what percentage?
Mr. Neville: It depends. There's a sliding-scale formula. It can
go as high up as 90 per cent, and given the magnitude of this event, we will
be very close to it. We will be into 90 per cent for sure. That is why I
said $3.1 billion estimated provincial cost; the federal share would be $2.8
billion, which is about 90 per cent.
Senator Buth: A question to Public Safety, as well. In terms of
the payments to Manitoba for the floods in 2011, you made a comment at the
beginning that you were accelerating the cash flow payments to Manitoba.
What do you mean by ``accelerate''?
Mr. Neville: Based on the province's forecast, we had set aside
money each fiscal year based on what they figured they would be spending.
When they submitted their claim, they had spent more money in a quicker
amount of time. So we profiled money from a future year, brought it to this
year, so we were able to make a $200-million payment this past year,
bringing the total amount that we have paid for that particular event to
Manitoba to $300 million, which is about 60 per cent of what we think we'll
be paying for that event.
Senator Buth: Great. That answered my next question. Thank you
The Chair: Thank you, and thank each of you, Indian Affairs and
Northern Development Canada and Public Safety Canada. Thank you very much
for being here and good luck to you in spending this money. We appreciate
Colleagues, the Office of Infrastructure Canada is at page 2-73, and
National Defence is at 2-63, again, in the English version of Supplementary
Estimates (B), and we will be referring to those specific pages as we go
through our questions. Can anyone help me with the French version?
The Office of Infrastructure Canada is on page 2-28 in the French
Honourable senators, we are now going to continue our study of the
budget, Supplementary Estimates (B). In our second hour this evening we are
pleased to welcome the following officials: From the Office of
Infrastructure Canada, we welcome Yazmine Laroche, Associate Deputy
Minister, Transport, Infrastructure and Communities; Su Dazé, Assistant
Deputy Minister, Corporate Services; and Natasha Rascanin, Associate Deputy
Minister, Programs Operations. Welcome to the three of you.
Who will be the spokesperson for the Office of Infrastructure Canada?
Yazmine Laroche, Associate Deputy Minister, Transport, Infrastructure
and Communities, Infrastructure Canada: I will be.
The Chair: I will introduce National Defence first, and then I
will come to you to see if you have any introductory remarks, and then we
will get on with senators' questions and answers.
From the Department of National Defence, we welcome back Mr. Kevin
Lindsey, Assistant Deputy Minister, Finance and Corporate Services;
Lieutenant-General Guy Thibault, Vice Chief of the Defence Staff; and Rear-
Admiral Patrick Finn, Chief of Staff, Materiel Group.
I understand National Defence will not have introductory remarks but are
here in force to answer any questions that you might be asked, and you might
be asking how much they lapsed last year, why and where that's come from,
but that will come a little later. Right now we will hear from Ms. Laroche.
Ms. Laroche: I'm really delighted to be with you here this evening
to be part of this panel appearing before you. It is my third day on the
job, so I am very delighted to be accompanied by my dear colleagues here, as
you've already met, Su Dazé, Assistant Deputy Minister for Corporate
And Natasha Rascanin, the Associate Deputy Minister for Program
Operations. This evening, I wish to provide you with an update on the work
that Infrastructure Canada has done since the introduction of Economic
Action Plan 2013 and the department's plan for the coming months.
Economic Action Plan 2013 will provide a total of $70 billion over the
next 10 years to invest in federal, provincial, territorial, municipal and
First Nations infrastructure across Canada.
The largest portion of this investment is the $53 billion new Building
Canada Plan, and it will support provincial, territorial and municipal
infrastructure through three funds.
First, there's the Community Improvement Fund, which includes both the
GST rebate for municipalities and the gas tax program. As you may know,
Infrastructure Canada manages the Gas Tax Fund, which provides $2 billion
every year to municipalities for their local projects. In addition, the
government has announced that it is indexing the Gas Tax Fund at 2 per cent
per year, starting in 2014. Together, these components will represent $32.2
billion over the 10 years of the plan.
The new Building Canada Plan also includes the new Building Canada Fund,
which will provide $14 billion over 10 years through the National
Infrastructure Component and the Provincial-Territorial Infrastructure
With respect to the implementation of these funds, our first priority is
to have the new Gas Tax Fund agreements in place as soon as possible to
ensure to ensure a smooth transition from the existing program to the new
one. We sent the new Gas Tax Fund agreements to the provinces and
territories on November 5, and as Minister Lebel has stated, the Government
of Canada is ready to sign them.
We are also working diligently to develop the program parameters for the
new Building Canada Fund and, as stated by the minister at the Standing
Committee for Transport, Infrastructure and Communities, we hope to be
announcing details soon.
While we are developing parameters for our new programs, we continue to
work with our partners to deliver the $6 billion in existing funding under
our current programs, which will flow in this fiscal year and beyond. This
means that between the federal Gas Tax Fund and our other current programs,
such as the Building Canada Fund, provinces, territories and municipalities
continue to have access to funding for their infrastructure projects.
I would like to say that from the very first Economic Action Plan in 2009
to the most recent one, presented in March, Infrastructure Canada has
established a strong, successful track record in delivering infrastructure
funding to projects across the country.
We are building on this experience as we continue to work in
collaboration with our partners, provinces, territories and the Federation
of Canadian Municipalities to implement the new Building Canada Plan.
Thank you for inviting us today. We would be very pleased to take your
The Chair: Congratulations on your first presentation in your new
position. We appreciate your being here with your team. Could you look to
page 2-73 for us, and this is the Office of Infrastructure Canada. We're
still trying to work our way through some of these concepts. I am looking
three quarters of the way down the page at ``Available Authorities''; we had
an explanation of what that meant by the Treasury Board as being some money
approved for expenditure but then because of government policy you were not
authorized to spend it.
Then I looked at that $9,927 and at the table at the top, and it looks
like you moved it from operating to contributions, but it was money you
couldn't spend in the first place. Could you explain to me why I see it in
three different places, knowing what it was?
Ms. Laroche: Well, I will try. I used to be at Treasury Board, so
I can with great confidence blame it on my former department. This is at
their request, and it is really a matter of presentation. Ms. Dazé may wish
to provide more information on that. May I ask you to do that?
Su Dazé, Assistant Deputy Minister, Corporate Services, Infrastructure
Canada: Yes, she is correct, it's a technical adjustment that the
Treasury Board has done. The $9,927 reflects a reduction made to the
government announcement that they were looking to generate savings in the
area of travel, and that's what it relates to.
The Chair: So we had approved it for travel but then it turns out
you couldn't use it for that because of a government cutback. Then why do
you move it from operating to contribution or vice versa up in the table?
Ms. Dazé: This is the manner the Treasury Board Secretariat
decided to display it in their books, so we followed their direction and
provided it that way.
The Chair: Where is it going now? What are you going to be using
Ms. Dazé: We're not going to use it. It's a reduction. We've been
asked to spend less in our travels, so they've reduced our operating by that
The Chair: It's out of operating?
Ms. Dazé: Yes.
The Chair: Thank you.
Senator Gerstein: Thank you to all panelists for being here today.
Mr. Lindsey, last year we had the pleasure of having Major-General Robert
Bertrand here, and I asked him a question: How could he spend part of his
capital budget on operations and still have money for new equipment? He
responded that it's a tricky concept, to which I replied, ``You can say that
Would you agree that it's a rather tricky concept that we're dealing
Kevin Lindsey, Assistant Deputy Minister, Finance and Corporate
Services, Department of National Defence, Canada: Senator, I prefer, as
much as possible, to remove the mystery from these things. That said, I am
not sure where your question is going.
Senator Gerstein: Let's go to the specific. If I could ask you to
turn to page 2-64 in Supplementary Estimates (B), as I understand it we are
being asked to approve the transfer to operations of capital of $61,999,000
and my first question to you is this: What is this $61 million? It's a very
specific number. It's not just $61 million; it's $61,999,441. This must be
the total. Somebody must run a tape of things that comes up with this total.
Could you give us some idea of what it is? It's operations, obviously. It's
Mr. Lindsey: Senator, what happened was that through the Main
Estimates, Parliament approved a certain amount of money in capital for DND.
As the year progressed, due to a variety of circumstances that I'd be happy
to explain, we find we cannot spend all of the capital previously approved
by Parliament. That becomes available for some other purpose, either to
redirect to other capital projects or, in this case where we have
incremental vote 1 or operating requirements, rather than ask Parliament to
appropriate another sum of money to meet those vote 1 requirements, we're
asking Parliament instead to take this capital that we cannot use and
transfer it into vote 1, rather than increase the amount of our total
appropriation per year.
Senator Gerstein: So if that's the case, if I may ask, how much
capital is in the piggy bank that you can transfer? Because if you assume
that's the position, the number could have been $161,999,941. Would that
have been available to transfer over if that was the number?
Mr. Lindsey: The reason the number is what it is is because that
is the amount we needed to transfer to vote 1 to deal with our requirement.
Senator Gerstein: To meet the requirement?
Mr. Lindsey: Right.
Senator Gerstein: So if the requirement was more, you would have
Mr. Lindsey: We would have, if we had it available.
Senator Gerstein: Do you have it available?
Mr. Lindsey: As it happens, we have about $226 million in capital
that we do not need, and $62 million of it we're transferring to the
operating vote. The rest of it we're using to offset new capital
requirements that are included in this estimate, for example for the Arctic
offshore patrol vessel.
Senator Gerstein: May I be permitted one more quick question? If
you follow the old saying that you have to pay the piper later if not
sooner, I am assuming that what went into the capital account was on the
basis of something that you had decided that you were going to acquire. It
didn't come in now; it's going to come in later.
In effect, notwithstanding you're spending the money today that has been
approved, doesn't that mean you're going back in the future and ask to cover
what you've already ordered and is going to come in at a later date? I am
not sure I could run my personal finances the way you're doing it. That's
not to suggest what you're doing is not the right thing.
Mr. Lindsey: Normally we would, except the need we are satisfying
in the operating vote has been provided for in the fiscal framework, as has
the capital for this item. So all we're doing is from a cash perspective, as
distinct from the fiscal framework perspective, using cash already
appropriated by Parliament to satisfy this need. The money that is not being
appropriated for this new operating requirement, because we could use the
capital to offset it, remains in the fiscal framework available to fill the
hole in the capital budget in the future year.
Senator Gerstein: I thank you very much for the explanation. Mr.
Chair, I must say, slowly I am getting there. Very helpful and thank you
very much, sir.
The Chair: Senator Gerstein, you're helping us all with these
questions, so we thank you for that. It's difficult to follow, Mr. Lindsey,
the transfers out of operating and transfers out of capital, and it doesn't
all go from one to the other, either.
As you say, you move it from one capital item to another capital item.
You're able to do that, but if you didn't spend the money last year you have
to come back here and ask us for money this year, even though you had money
you can't spend this year.
Mr. Lindsey: In fact, senator, we have an example of that in these
estimates with the Manuge case where Parliament appropriated a little
over $900 million for the settlement for that class action suit but, because
of the timing, we couldn't make all of the payments last year. This year
there remains an outstanding liability of a little over $500 million, so
because we didn't spend all of the money that Parliament appropriated last
year, we reprofiled it to this year, and that requirement is in these
supplementary estimates to settle the balance of that lawsuit. That $500
million, by the way, that we're bringing forward to these supplementary
estimates is included in last year's lapse that you referred to earlier.
The Chair: Because it lapsed last year, do you have to wait for us
to approve it in order to get that money out to the veterans on pensions who
lost some of their funds by reason of this particular lawsuit subject
Mr. Lindsey: We do.
The Chair: So it still has not been paid out?
Mr. Lindsey: Part of the settlement has been paid out of the money
appropriated last year.
The Chair: Less than half?
Mr. Lindsey: Slightly less than half. This will settle the balance
and, subject to when the day is done, perhaps some interest payments; but
for the most part, we expect that this amount will settle that suit.
The Chair: Can you assure us that it is not going to be delayed by
virtue of having to develop a memorandum of understanding or some other
documentation that's going to slow up the federal government's contribution?
Mr. Lindsey: I want to check with counsel, senator, but I think
that all of the paperwork that needs doing has been done. We're simply
waiting now for the money to enable us to make the payments.
The Chair: Thank you, Mr. Lindsey. If it turns out otherwise,
you'll let us know.
Mr. Lindsey: We will.
The Chair: We'll take that as the answer.
Senator Buth: My question is for Infrastructure Canada. You make a
comment in your presentation that the government has indexed the Gas Tax
Fund at 2 per cent per year, which I know our municipalities are very happy
Does this mean that the gas tax also increases at 2 per cent per year?
This is the Gas Tax Fund, so this is money that's coming from the gas tax
back to the municipalities.
Ms. Laroche: Correct.
Senator Buth: You're indexing it out to municipalities.
Ms. Laroche: Correct.
Senator Buth: Is the gas tax also going up by 2 per cent?
Ms. Laroche: The excise tax that is being charged?
Senator Buth: Right.
Ms. Laroche: My understanding is that, no, it's not. This is
simply an increase in the transfer from the federally collected gas tax
revenues on behalf of municipalities; but, no, there is no increase to the
gas tax that citizens will be paying, or that the manufacturers are paying
the federal government.
Senator Buth: How many years can you continue to increase the Gas
Tax Fund until you end up essentially contributing all of the excise tax
back to the municipalities? Is that analysis being done?
Ms. Laroche: I think we'll have to check with our colleagues in
the Department of Finance, because it represents only a portion of the
federally collected gas tax.
And the indexing, as has been laid out, we're talking about a 10-year
period right now. We'd be happy to discuss that with our colleagues at the
Department of Finance and get back to you, senator.
Senator Buth: That would be great.
Senator Hervieux-Payette: You index, and it's costing the same.
Could you explain that to me? You say it's indexed and it stays at 2 per
cent; normally when you index something, it goes up.
Ms. Laroche: No. It is actually going to increase, senator. I
believe the question was whether the government is going to actually raise
the amount of gas tax it's collecting, and would that also be indexed.
But in terms of the payout to municipalities, yes, it is actually going
to go up, and that starts in 2014. The indexation begins then, so you'll see
the cost projections rise. It starts at $2 billion, and it will start to
gradually increase year over year. The payout to municipalities will
Senator Hervieux-Payette: You do not give it back every year to
Ms. Laroche: Yes, we do. It's paid out on a biannual basis through
the provinces to the municipalities.
The Chair: Thank you for that clarification.
Senator Buth: In your presentation as well, you make the comment
that you're continuing to work with partners to deliver the $6 billion in
existing funding, which will flow in 2013-14 and beyond. What's the beyond,
and how is it captured in your estimates?
Ms. Laroche: I will ask my colleague, Ms. Dazé, to give you the
details on that, senator.
Essentially, as funds get reprofiled in some of our original
infrastructure programs, they extend beyond 2013-14. What you're going to
see is an overlap between the original infrastructure funds that will
eventually sunset, and they will start to wind down as the new
infrastructure funding starts to ramp up. So there will be an overlap, and I
think Ms. Dazé can give you more detail on that.
Ms. Dazé: We have a number of programs that are currently in
existence, and the terms and conditions of those programs exist into
2018-19. The money is profiled, and as Ms. Laroche said, they will dwindle
over time as the programs reach the end of their life as the new programs
come on stream.
Senator Buth: Each time we see the estimates, do we see those
funds? Where is that money kept, essentially? It's going to flow out to
2018-19. You have a commitment and you have a contribution agreement, I
Ms. Dazé: Yes, exactly. We have it in our reference levels. The
planning documents go for three years, but the rest of the money is booked
beyond the three years in the fiscal framework for us, so it's there and
waiting for us when we get to the appropriate Main Estimates year.
Senator Buth: So we haven't approved those yet.
Ms. Dazé: Correct.
Senator Buth: Those will come back to us in Main Estimates?
Ms. Dazé: Absolutely.
Senator Eaton: Right now there is the $2 billion which is indexed
at 2 per cent; right? Then they say the new Building Canada Fund, which is
$14 billion over 10 years. Is that the same fund, different fund, new money?
Ms. Laroche: Yes, that is new money.
Senator Eaton: Then you have the $6 billion, which the senator was
asking you about; is that new money or old money?
Ms. Laroche: That is old money. That's from the original
Senator Eaton: That's not the gas tax money plus the 2 per cent?
Ms. Laroche: No, that is separate. There are different pots of
money for infrastructure.
Senator Eaton: Thank you very much.
Ms. Laroche: You're welcome.
The Chair: Quite a few different pots, as we've found out in the
Ms. Laroche: Yes, there are.
The Chair: We should have you back some time to talk about your
various sources of funds and the funds you pay out under different programs,
but we'll try to stick to supplementary estimates at this time.
Senator Hervieux-Payette: I have a specific project in mind. I
have worked with grants before, involving measures in different areas. At a
certain point, the money disappeared because the project was not completed
quickly enough. I am referring to a waste treatment facility in Montreal;
the project was apparently set up to use infrastructure funding. Now, there
is a delay, so I am wondering how you handle the disbursements. Do you pay
them out at the end of the project, midway? Is there a time limit on how
long you keep the money for the project? I am wondering how you administer
that. This is not just me asking you specifically about this, but there are
also people waiting to hear the answer.
Ms. Laroche: I am going to turn the floor over to my colleague,
Ms. Rascanin, because the answer is that it depends on which program the
funding comes from; the terms and conditions for funding vary from program
Senator Hervieux-Payette: Infrastructure funding for waste
treatment; it is tied to the environment or some area like that. A variety
of processes fall under the category of waste treatment, incineration,
landfills, gas and other methods. I am wondering about this case
specifically, given that I was told the project was going forward because
there was infrastructure money that people wanted to spend. Usually, a
project goes ahead because there is a need for it, not because there is the
money for it. My question is how long it is set aside for, because if the
money was there for Montreal, could it be used for something else if the
project was not completed?
Natasha Rascanin, Associate Deputy Minister, Program Operations,
Infrastructure Canada: I am not certain which specific project this is,
but I'll give you an example. We would sign a contribution agreement with
the particular province or other proponent, and there are specifications in
the contribution agreement, what conditions need to be met and when payments
can be made. Most often, we receive claims from the proponent for work
completed. We review them and do the due diligence work to ensure that the
claims are for appropriately assessed expenses as per the contribution
agreement, and, if that is so, then we would pay based on progression of the
If there are delays, which often can happen in large infrastructure
projects, then those payments would be delayed to when we receive the
claims, but the payments would continue to the specific project, as long as
it is continuing in accordance with the contribution agreement.
Senator Hervieux-Payette: But there is no cut-off date? I remember
very well a project I was involved with. The program stopped, and all of a
sudden, the company had spent millions of dollars to put it together because
these were at a fixed price. You have to go into a lot of details in the
engineering, so it cost a lot to get there. I am talking about a $60-million
project. I would just like to ascertain that the money will not expire
because of delay or change. We have a new administration. The mayor said,
``We are going to re-examine the whole question of the treatment of
garbage.'' Of course, what was decided before was just to put it on hold,
and they will decide where they will locate them and what kind of technology
they're going to use, et cetera. It's being done now, but it will take some
time. I'm talking about a huge amount of money. It was initiated because of
that program, and now we're talking about two envelopes, two infrastructure
programs. Will the criteria be the same?
Ms. Rascanin: We do not yet have approval of the program
parameters for the new program, but the current program goes out in time.
There is time yet to complete and pay out under current programs.
Senator Hervieux-Payette: Okay, thank you.
Senator Bellemare: My questions are for the Infrastructure Canada
officials. You said that $70 billion would be invested in infrastructure
over the next 10 years. Are provinces required to match the federal
investment dollar for dollar? Are municipalities? Does it mean that the
actual investment will be $210 billion over 10 years?
Ms. Laroche: It all depends on the program, because infrastructure
programs have numerous components. The Gas Tax Fund, for instance, is a
transfer from the federal government to the provinces, meaning there is no
requirement for provinces and municipalities to provide money for that
component. It is not required.
There are other programs, however, with a clear requirement that
provinces and/or municipalities contribute to the project. Those work on a
cost-sharing basis. That is why we could give you an estimate, but we
wouldn't be able to tell you today exactly how much that $70 billion will
Senator Bellemare: In its March budget, the government allocated
infrastructure funding over 10 years, and the total authority requested to
date is $4.151 billion. In terms of the $70 billion, does that include the
infrastructure projects planned for 2013-14?
Ms. Laroche: No.
Ms. Dazé: It is for existing programs.
Ms. Laroche: The $70 billion is for new programs.
Senator Bellemare: Could you elaborate a bit on the $55-million
vote to meet the government's commitments to the Provincial-Territorial
Infrastructure Base Funding Program to help restore fiscal balance while
enhancing Canada's public infrastructure?
Will there be an investment associated with that $55 million, or does it
simply represent a transfer payment to balance budgets?
Ms. Laroche: It is money that has already been committed. It has
not been spent for a number of reasons, so approval is being sought to spend
it. It is an existing program. Perhaps Natasha could explain.
Senator Bellemare: Since it refers to fiscal balance —
Ms. Laroche: That was part of the terms and conditions of the
program and the whole purpose of the program from the outset. The
investments were made for that specific purpose, and it was an existing
Ms. Rascanin: The objective of that particular fund, exactly as
Ms. Laroche said, when it was first announced in 2007, I believe, was to
help restore fiscal balance, and that was between provinces and the federal
government. So it's not about balancing budgets per se. That is the
objective that was part of the program at the time, and it continues in that
sense. It is reprofiling of funds that were not spent last year that need to
be moved, with Parliament's approval, into this.
Senator Bellemare: Is the funding distributed to the provinces on
a pro-rated basis? What criteria have to be met?
Ms. Rascanin: This particular program is the PT base fund, and it
is a program where $25 million per year, per jurisdiction, is provided.
Senator Bellemare: The $70 billion does not have any criteria
either; there may be some among the provinces. Is it at the request of the
provinces and municipalities?
Ms. Laroche: It depends on the program because the $70 billion
includes a number of programs, each with its own conditions. It includes the
Gas Tax Fund, for instance. It also includes the new Building Canada Plan,
which is in the process of taking shape. Right now, the government is
working out the parameters for the new programs.
Senator Bellemare: The reason I am asking is that I am wondering
about the Champlain Bridge, among other things. You will pay the
infrastructure costs, but will the money allocated to Quebec be frozen, or
is it on top of that? The money is not distributed on a per capita basis.
Quebec or Nova Scotia, say, is not entitled to X amount in infrastructure
funding. It does not work that way, does it?
Ms. Laroche: The Champlain Bridge money is from another funding
Senator Chaput: My question is also for the Infrastructure Canada
officials. I read your departmental performance report on the Internet with
interest. The report talks about information management and information
technology. That is a hot topic these days.
The report also states that Infrastructure Canada may be unable to
quickly and effectively address information management and information
I would like to know where exactly you are in terms of information
management and information technology. After all, the government is using
technology more and more to promote its programs and to ask clients for
Ms. Laroche: I will ask my colleague to answer that.
Ms. Dazé: We are in the process of doing the transition to Shared
Services Canada. We have a large computer system that manages our thousands
of programs. We rely on it very heavily, and there is a risk that if it
doesn't get transitioned appropriately and at the right time, we wouldn't
Now, having said that, we have it on our radar, and we're taking steps
and we're working very closely with our colleagues at Shared Services Canada
to ensure that we have plan A, plan B and plan C and that we do not arrive
The purpose of doing a risk assessment is to identify where potential
risks could be and to take action immediately to ensure that the negative
outcome does not take place.
Senator Chaput: Seeing that you have to deal with larger and
smaller municipalities, can you ensure that whatever program you have — and
that they have to use — is a user-friendly program when they need to fill
out forms or whatever?
That's one of the — not complaints — but one of the worries of our
municipalities — the smaller ones — that it could get too complicated and
they would need to go and hire someone to help them do it, and it would be
additional costs to those municipalities.
Ms. Dazé: Yes, thank you. We'll take that back.
Senator Callbeck: My question is also on infrastructure. We talk
about lapsed funding. If I recall correctly, when Kevin Page stepped down —
the former Parliamentary Budget Officer — he talked about this, or expressed
concerns about the lapsed funding in many departments. And I think
Infrastructure Canada was of particular concern to him. How much funding
lapsed last year, up to March 2013?
Ms. Laroche: I will turn to Ms. Dazé for the details on lapsing,
but I would like to clarify, perhaps, senator, because when we are talking
about our Infrastructure funding, the money is not lost. In fact, that's why
we're coming before you with our supplementary estimates; it's actually to
seek your approval that we can take funding that we were unable to spend
last year for a number of reasons — and I can go into that — and to actually
reprofile it into the current fiscal year.
So the funding is not lost; it's simply deferred so that we can actually
make the payouts as they're incurred so that we can comply with the
conditions of our programs.
With respect to your specific question as to how much we lapsed last
year, I will turn to our CFO, who has the information on that.
Ms. Dazé: It's $1.5 million.
Senator Callbeck: That's all — $1.5 million?
Ms. Dazé: Sorry, billion.
Senator Callbeck: Oh, I thought you said ``million.'' What about
the year before that?
Ms. Dazé: It was $1.7 billion. But what happens is that we pay
after the fact. Once the construction has been completed, we work with our
partners — they do the work — and then they submit their bills to us and
then we pay after the fact. We pay according to the pace of the construction
that's taking place.
Senator Callbeck: So $1.5 billion last year. That would be what
percentage of your overall budget?
Ms. Dazé: That would be 29.5 per cent.
Senator Callbeck: That's a fair amount.
For Defence, I had a question pertaining to the $400 million. You're
asking for that for the Canada First Defence Strategy, and I assume that
some of that money is going towards Tactical Armoured Patrol Vehicles,
Mr. Lindsey: Actually, no.
Senator Callbeck: No?
Mr. Lindsey: No. Now, I do know — a bit awkward — but I do know
that in testimony earlier in the week a Treasury Board official did suggest
that some of that $400 million was going to armoured vehicles. But that is
not, in fact, the case, and I can articulate for you where that $400 million
is going, if you'd like.
Senator Callbeck: Okay.
Mr. Lindsey: We have $43.3 million going to the MOU for the new
fighter procurement. We have $189 million going to maritime readiness. We
have $15 million going to land readiness. We have $81.7 million going to
aerospace readiness, $30.6 million going to joint and common readiness, $15
million going to Arctic training and $25.6 million going to joint personnel
Now, I have rounded some of those figures, senators, but that comes to
approximately $400 million.
Senator Callbeck: In these Supplementary Estimates (B), there is
no extra money going for these vehicles that I'm talking about?
Mr. Lindsey: No, there is not.
Senator Seth: Thank you very much. I think that's the same
question that I had — that Senator Callbeck asked. And I think you answered
it very well — where the money is going, this $400 million. Thank you.
Senator L. Smith: I was just worried that Mr. Lindsey was getting
tired or he felt lonely.
The Chair: No one was asking him any questions.
Senator L. Smith: Mr. Lindsey, I go back to Senator Gerstein — to
the end of that question he had asked — the $61,999,000. What was that
targeted for that's now been sort of set aside, to reduce the amount of new
appropriations required? What is that?
Mr. Lindsey: In total, we have about $226 million available in the
capital vote that became available to use for other purposes. That $227
million is attributable to, first, the maritime helicopter project, where
the $103.8 million we had forecasted will not be required. A further $83.7
million is associated with the medium- and heavy-lift helicopter. It will be
required in future years but not this year, as we had anticipated. Last was
$26.8 million associated with special vehicle kits they were going to put on
medium support trucks.
Senator L. Smith: Just so I understand, I think it was $87 million
that you mentioned initially was not required for, I guess, it was the
Mr. Lindsey: Two helicopter projects: One is the maritime
helicopter project — $103.8 million not required. The other is the medium
heavy lift — that is the Chinooks — $83.7 million.
Senator L. Smith: When you say ``not required,'' you're not going
to order as many units, there's a price reduction, timing — what is it?
Mr. Lindsey: Changes in the timing of deliveries and the
construction of related infrastructure. In the case of the maritime
helicopter, it is delivery issues, and they have been well, well covered in
In the case of the Chinooks, again there are changes in the delivery
schedule, both associated with taking delivery of the helicopters and
building the related infrastructure.
Senator L. Smith: Is the manufacturer having trouble delivering on
time, or is it that you folks don't need the equipment now?
I'm just trying to understand the planning phase. What happens in this
case? Is there some problem between the purchaser and the supplier in terms
of coordination of the contract? Is it a delivery issue, is it a quality —
Mr. Lindsey: In the case of the maritime helicopter, it is those
kinds of issues that you've just referred to. If I may, I'll defer to
Admiral Finn, who can perhaps explain the reasons for the delay in the
Rear-Admiral Patrick Finn, Chief of Staff, Materiel Group, Department
of National Defence, Canada: Thank you for the question, senator. In
fact, in the case of the Chinook helicopters, they started delivery this
past summer. So they're delivering at a certain pace. There are other
associated elements with the delivery; there are spare parts, training,
technical data, there is moving into the new facility in Petawawa. There are
a number of items associated with the delivery of the capability.
In the case of the Chinooks they are delivering the helicopters on time.
As we introduce them, as far as getting everything aligned, we have to do a
number of things around airworthiness. Again around infrastructure, there
was a little bit of a delay in the infrastructure in accepting it as far as
moving the whole squadron into it. That has now occurred. It created a bit
of delay and some reprofiling but, in the case of the Chinook helicopters,
the helicopters themselves are in delivery as planned, and the capability is
coming on line as planned.
Senator L. Smith: When we go to page 2-63, funding for the
definition phase of the Arctic/Offshore Patrol Ship implementation programs,
$164 million. Where is that project at? I'm wondering if there is any
connection to the reallocation of the $61.99 million. Are these points
related at all?
Like funding for the definition phase of the Arctic, what is
``definition''? Is that the engineering phase of the project?
Mr. Lindsey: Perhaps I'll defer to Admiral Finn again, senator, on
that question, and then if you have a question remaining as to the funding —
Senator L. Smith: If there is any linkage between that and the
$61.99 million that you're sort of setting aside, I just wondered, is it
associated, is there a linkage or is it just non-related?
Mr. Lindsey: If you take the $227 million in capital that I
referred to earlier, where I said we don't require it this year, we don't
require it for those three projects, so instead we're able to reduce our
supplementary estimates ask by taking that money and devoting it to — by
reducing the ask — the Arctic patrol ships. A portion of that $227 million
in capital this year will now be used for the AOPS, and the money that was
to have been used in the fiscal framework for these Arctic patrol ships
becomes available to fill this gap for these other projects in the future.
Senator L. Smith: Admiral, the definition phase, how is that
program going and what's the next step?
Rear-Admiral Finn: Thank you for the question, senator. The
definition phase is all of the design and then some. Under the shipbuilding
strategy, as you would know, we've selected the two yards: one on the East
Coast and one on West Coast. In this case, it is the East Coast yard, the
Irving yard, which is fundamentally retooling their facility and standing up
to be a world-class, medium-sized shipyard.
They are in the throes, literally tearing down the last of the old
infrastructure as we speak, and they're building up, introducing new
processes. At the same time they have really progressed the detailed design
of this new ship. That will be finished actually in a number of weeks, and
then we'll get into construction design.
They will also start to look at acquisition of long-lead items, things we
have to order early. They also, through this definition phase, will build a
couple of test modules of the first ship in the new facility to prove it
We have about another 18 months to go, but through that it will be the
new facility, the design, 100 per cent complete, right down to the detail,
test modules, long-lead items, such that we're well positioned, under the
strategy, to start construction of the first ship in mid-2015. That's all
rolled up into the definition phase.
At the same time, what we're doing on an infrastructure side, so for
example in the Arctic with the Nanisivik facility, that's also being funded
by the money for an Arctic/Offshore Patrol Ship, and again that's because of
the summer construction season up there, and also working on jetties and
other things. We have everything moving in parallel so we can expedite the
Senator L. Smith: From a critical-path perspective, is this
project on time?
Rear-Admiral Finn: From where we had started, senator, when we
sought definition in 2007 and 2008, there has been a delay. When we started
the project we were also in the throes of the first joint support ship
request for proposal and, of course, the bids that came back showed us the
state of shipbuilding in Canada and where we found ourselves. So we actually
paused the Arctic/Offshore Patrol Ship project and the Coast Guard paused
some of theirs such that we could bring it all together and put it under the
strategy such that we could reinvest in two yards that then would have
basically decades of work on their order book, from which we would gain
So we paused to do that work, we're moving out now again, and have, I
would say to you from experience, a very robust approach. We are now having
detailed discussions with the ship designer and the shipyard that,
historically, we would have tried to do in some sort of competitive
environment, which did not work well. From a cost versus capability
perspective, we've had very detailed discussions around the Arctic/Offshore
Patrol Ship; it has allowed us to address some cost drivers.
For example, this summer we revisited the design with the builders and we
actually lengthened the ship to make it easier to build — although longer a
bit easier to build — which has a positive impact on price. We are quite
optimistic that with everything we have set in motion now, we really are on
the right path as far as that project goes.
Senator L. Smith: With the delays or with the timing element, has
there been, from an efficiency perspective, money wasted or lost, or is this
just part of a contingency that you had included in the planning phase of
Rear-Admiral Finn: Certainly there has been an impact on the cost
and escalation somewhat around the buying power. Yes, there is contingency,
but also, senator, offset by the investment being made. What we've learnt in
previous requests for proposals, for example, was that as a yard would win
one of these contracts they would then have to spend several hundred million
dollars to actually establish infrastructure and processes and procedures.
The Irving yard has actually done that through the Province of Nova
Scotia and through some other loans that we will actually repay and
recapitalize over decades through all the projects. So instead of having the
single projects having to, right up front, spend several hundred million
dollars to do it, we actually have the benefit of doing it across all the
Between that, the efficiencies, so the shipyard has partnered with Bath
Iron Works in Bath, Maine, which has built literally hundreds of destroyers
and frigates to bring in the best practices.
We can't say absolutely for sure until we get into it, but certainly, in
all of the detailed cost work that has been done — again this is completely
being done open book, so historically we would have had a competition — we
are sitting there with the designers and builders, and to this point have
all the right feedback to say that the budget remains adequate, with the
contingency included, to build the ships as planned.
The Chair: I have, for round two, one name thus far.
Before I go to round two, I would like to ask you to think about this
amount that has lapsed. And each of you, I'm looking at the Office of
Infrastructure Canada, total expenditure, $3.7 billion and $1.5 billion of
that was not spent. That's what was lapsed, and you explained why, and
And National Defence, on the record used in the year $20 billion, lapsed
$1.4 billion. You were able to carry forward $27 million, and we understand
the carry-forward, and we understand a percentage is allowed for carry-
forward, but because of what you explained to us and the delays in projects
with respect to infrastructure and likewise, some of the built-in delays
that are almost predictable in these very large projects, is the problem
that we are budgeting for only one year at a time when we look at these
The Minister of Finance was very surprised to find that $7 billion hadn't
been spent last year. You start looking in these documents in the Public
Accounts and you can see that where the $7 billion comes from, in large
part, is through lapsed funds and projects that just weren't ready for the
funding that we had approved.
If you were in the cycle of two years, would that work better for
National Defence? There are two or three departments that are in two-year
cycles now. Should we be advocating for something like that to help avoid
this kind of — there's such a variance that it's very difficult to predict
what's going to happen from a fiscal point of view.
Mr. Lindsey, do you want to start, and then I'll go to Ms. Laroche.
Mr. Lindsey: I'm treading on thin ice here a bit, senator, because
I know my colleagues over at Treasury Board have certain views on this. That
said, having worked there myself and been party to some of these
discussions, I do have some views.
Fundamentally, in a government context, spending authorities are provided
for finite periods of time. In our case right now, for most departments and
agencies, it's 12 months. Some very limited number of agencies I believe
have a two-year authority. There has been talk of non-lapsing authorities.
This finite appropriation distinguishes us fundamentally from the private
sector. Certainly, private sector companies have fiscal year-ends, but when
the year-end is done, their cash doesn't go away. Their cash is still in the
bank. They aren't being measured publicly about how much they spent versus
how much they had budgeted. Going to a two-year appropriation would
certainly reduce the frequency with which we have these discussions about a
lapse, but it wouldn't utterly eliminate the discussions, and the reason it
wouldn't is that things would still go sideways.
Let's say, for example, in our case this year with Manuge, last
year we forecast we would spend about a billion dollars, and we asked for an
appropriation in that amount. At the end of the day, we spent about $490
million. Let us say we were in a cycle where we had a two-year
appropriation, but Manuge had arisen in the second year of that
appropriation. Other things being equal, we would still have asked for more
than we needed in that second year of the appropriation and would have asked
for a reprofile.
The Chair: Or you might have applied some of the first year lapse
to that project.
Mr. Lindsey: We might have done.
The Chair: You have some more flexibility.
Mr. Lindsey: We would have more flexibility, absolutely. There are
definitely benefits to that kind of regime, but it is not a panacea. It
would not make these issues utterly go away.
The Chair: If you have some ideas later on that you would like to
send to our committee, that would be helpful. There probably is no panacea,
but if there are ideas we could pass on to Treasury Board and Finance that
would help this rather major dilemma that seems to be happening right now,
that would be helpful. We thank you for explaining to us what causes the
lapses for your particular departments.
Ms. Laroche: I think my colleague has explained very well some of
the constraints that we deal with in the federal government.
At Infrastructure Canada I guess the only thing I would nuance is that we
depend on the forecasting of our partners because unlike my colleagues at
National Defence, we don't procure, so we don't manage the infrastructure
projects that way. We fund infrastructure projects that are procured and
managed by our partners in the provinces, territories and municipalities.
When we are doing our contribution agreements with them, when we are making
our own estimates, we are dependent on their forecasts.
Would a two-year planning horizon help? Possibly, but we would still be
dependent on their ability to forecast, and they are living with some of the
same challenges that all infrastructure projects are subject to in this
country: weather, labour shortages and other kinds of material issues. We'll
never fully resolve it, but possibly, giving us a longer planning horizon
might help in some instances.
The Chair: I think the two departments that come to mind that do a
two-year forecasting and two-year budgeting process are Canada Border
Services Agency and Parks Canada.
Thank you very much for that.
Senator Buth: For National Defence on page 2-63, you have two
available authorities there, one vote 1b and one vote 5b, $203 million, $164
million. Can you explain what those are?
Mr. Lindsey: I'm sorry, senator, I'm looking for my pages.
Senator Buth: It is 2-63, and the two available authorities.
Mr. Lindsey: Sure. Vote 1 is our operating vote. Vote 5 is our
capital vote. The ``b'' simply designates that this is Supplementary
Senator Buth: Treasury Board has explained that this is money,
essentially, that you cannot spend, and in some cases, we heard that it's
travel money. What is the explanation for these two amounts in National
Mr. Lindsey: National Defence has a total of $367 million
available, previously appropriated money that we cannot use for the
originally intended purpose. That breaks down as follows: $226.7 million in
capital, and I think in response to Senator Smith's question, I spoke to the
three projects that that relates to.
Senator Buth: Helicopters, helicopters and —
Mr. Lindsey: Truck systems. So that money is available in our
In our operating vote, we have $203 million available, and, like our
colleagues at Infrastructure Canada, we have money associated with the
freeze on travel. In our case, that amount of money is $18.8 million.
In addition, we have $110 million available because of a Treasury Board
decision to freeze money that we would have spent on severance payments and
relinquished that to the fiscal framework.
We have a further $12 million available due to a frozen allotment
established by Treasury Board, associated with a remission order. That's a
total of $220 million available in our operating vote.
Senator Buth: What's a remission order?
Mr. Lindsey: It's an authority provided to a department not to
seek reimbursement of an expense that might have been inappropriately made
or a debt due to the Crown for some other purpose.
Senator L. Smith: Mr. Lindsey, or Rear-Admiral Finn, there was a
delay in the project in terms of set-ups by your supplier, and I guess
you're creating infrastructure yourself.
Is there a cost to the delay that you actually quantify? Is there an
accountability as to who's responsible? For example, if you don't spend the
money, you can put money back into your budget, and either appropriate it
next year. But if there's a delay, which is caused by some form of
inefficiency, is there some tracking of that? Is there a performance-type
clause that you would have in your contract with the third party, so that if
there are delays caused by a third party that affect the deliverable, then
usually someone is responsible for it?
Rear-Admiral Finn: Thank you for the question, senator. It really
depends on the project and the contract. In many cases, in the case of the
helicopters, both projects we've talked about, those contracts are firm,
fixed price. So if there are delays, typically, the supplier would incur a
cost — the carrying charges, increased cost of labour, et cetera — and that
would come at their expense. There are other contracts, depending on the
complexity of it. Some of our design contracts, for example, we talked about
the Arctic/Offshore Patrol Ship, that's a bit of a different basis of
payment, so there are typically clauses in the contract where, depending on
the cause of the delay, we would impose liquidated damages, but those would
be negotiated up front, so it depends on which contract and the nature of it,
how much risk we're transferring to industry, how much risk the supplier is
willing to take, depending on what we're asking them to do. Where we can fix
price, they would incur the carrying cost of the delay.
Senator L. Smith: So the answer is that it's somewhere, but at the
end of project you guys do a post-mortem and go over who did what, and then
you're able to identify performance from both sides, from your side and the
Rear-Admiral Finn: We do on an ongoing basis, senator. We have,
for example, an inter-departmental committee on all of the major capital
projects that meets monthly to look at various performance parameters around
costs and schedule.
On the contracting side — because, again, Public Works is the contracting
arm of the department, so we rely on them as they continue to refine their
draft model contracts to take these things into consideration.
It's always a balancing. The Government of Canada, particularly for
Canadian industry, takes a very robust approach regarding the terms and
conditions we put in place, but often those come back to us at a premium. So
we have to be very judicious when establishing some of those contracts.
Yes, on an ongoing basis, we monitor the performance and try to
reintroduce lessons learned. To give you examples I've talked about, the
start of the shipbuilding strategy and the steps we took there were based on
both the Coast Guard's and National Defence's experience with attempting to
launch complex ship construction projects after being out of the game for a
Senator L. Smith: Not easy. Plus you have to deal with Public
Works, too, as they negotiate on your behalf.
The Chair: Thank you, Senator Smith.
I have just two points that may be of help. There is a publication, and I
believe it's on the Finance website, entitled ``Supplementary Estimates (B),
2013-14: Explanation of Available Authorities.'' This gives you a breakdown
of all the available authorities. The available authorities, as you will
recall, were where the government said ``you can't spend that,'' even though
we parliamentarians had approved it. This is a list of that money that the
government said, ``Notwithstanding what Parliament said, don't spend it.''
So that is available, and I am told that is Treasury Board, not Finance.
It's also referenced in our briefing note, so there is a reference for that.
The second point I want to clarify deals with National Defence. Under the
adjustments for these appropriations, Senator Callbeck had a discussion with
Mr. Lindsey in relation to $400 million plus. If you go back to page 1-6 —
this is perhaps where we were confused — included in describing support for
the ongoing implementation of the Canada First Defence Strategy in fact is
listed Tactical Armoured Patrol Vehicles. We understand from Mr. Lindsey
that's not the case now, but that's what Treasury Board had probably learned
from DND earlier on, and that's why there was some confusion on that
Mr. Lindsey: Thank you for pointing that out, senator. We will
look into that and we will undertake to get back to the committee.
The Chair: Thank you. If you could get back through our clerk,
that will be notified to all.
Thank you very much, Department of National Defence and the Office of
Infrastructure Canada. Each time we meet, we learn a little bit more. We
hope we will have a chance to see you again in due course. Keep up the good
work for Canada. Thank you.
(The committee adjourned.)