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Proceedings of the Standing Senate Committee on
National Finance

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 31, 2014.

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 31, 2014.


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 Officer.

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 approval?


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 supplementary estimates.

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 Arctic issues.

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 other things.

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 million.


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 contributions area.

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 (C)?

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 seriously.

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 of us.

Senator Callbeck: Roughly how many claims have been settled since 2007?

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 cases.

Senator Callbeck: Okay, thank you. Was that my time or do I have more?

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 arise.

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 resolved.

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 get?

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 money.

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 members.

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 the funds.

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 around radicalization.

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 agreements?

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 and housing.

Senator Hervieux-Payette: They are not ``claims''? You do not call them ``claims''?

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 Canadian economy.

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 place.

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 participation.


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 we pay.


Senator Hervieux-Payette: And what about private insurance coverage?


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 programming.


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 concerned?

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 service directly.

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 formal sense?

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 Nations communities?

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 service?

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 a municipality?

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 RCMP.

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 every year.

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 financial requirements?

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 settlements.

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 others?

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 Metis community.

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 oil.

The Chair: Before any money will flow, there is a need for some sort of a negotiated document between the province and the federal government?

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 very much.

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 your help.

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 version.


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 Services.


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 Component.


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 questions.

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 it for?

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 amount.

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 again.''

Would you agree that it's a rather tricky concept that we're dealing with?

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 not capital.

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 transferred more.

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 matter?

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 for.

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 increase.

Senator Hervieux-Payette: You do not give it back every year to the municipalities?

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 assume.

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 infrastructure programs.

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 past.

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 to 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 project.

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 ultimately represent.

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 infrastructure program.


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 source.

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 technology challenges.

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 information.

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 have information.

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 there.

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, right?

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 support units.

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 helicopters?

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 the media.

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 — What happens?

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 Chinooks.

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 all.

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 construction.

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 benefit.

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 your project?

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 projects.

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 that's fine.

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 particular documents?

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.

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 Estimates (B).

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 Defence?

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 capital vote.

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 supplier's side.

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 decade.

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 particular item.

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.)