Proceedings of the Standing Senate Committee on
National Finance
Issue No. 4 - Evidence - March 8, 2016 (afternoon meeting)
OTTAWA, Tuesday, March 8, 2016
The Standing Senate Committee on National Finance met this day at 2:12 p.m. to examine the expenditures set out in the Supplementary Estimates (C) for the fiscal year ending March 31, 2016 and the Main Estimates for the fiscal year ending March 31, 2017.
Senator Larry W. Smith (Chair) in the chair.
[English]
Welcome to the Standing Senate Committee on National Finance. My name is Larry W. Smith, senator from Quebec. I chair the committee.
Colleagues and members of the viewing public, the mandate of this committee is to examine matters relating to federal estimates generally as well as government finance.
Before we get to the specific topic of today's meeting, let me introduce the other members of the committee: Deputy chair, Larry W. Campbell, from Vancouver, a former mayor; Grant Mitchell, former leader of the Liberal Party in Alberta.
[Translation]
Senator Percy Mockler from New Brunswick.
[English]
Senator Nicole Eaton, Toronto; Senator Elizabeth Marshall from Newfoundland and Labrador, the former Auditor General of that province and a great person to have on our committee.
This afternoon not only do we continue our study of Supplementary Estimates (C) for the fiscal year ending March 31, 2016, but we will also look at the 2016-17 Main Estimates with three departments.
In our first panel each department will give short opening remarks on the supplementary estimates first, followed by questions, then opening remarks on Main Estimates, followed by another question period.
We are pleased to welcome the officials from the Department of National Defence. We have before us Mr. Claude Rochette, Assistant Deputy Minister (Finance) and Chief Financial Officer; Mr. André Fillion, Chief of Staff (Materiel); and Major-General John Madower, Chief of Programme, Vice Chief of the Defence Staff. We have hidden in the background, if needed, Mr. Jaime Pitfield.
We have, from Health Canada, Mr. Jamie Tibbetts, Assistant Deputy Minister and Chief Financial Officer, Chief Financial Officer Branch.
Claude Rochette, Assistant Deputy Minister (Finance) and Chief Financial Officer, National Defence: Thank you very much, Mr. Chair and senators, for the invitation to present the Supplementary Estimates (C) for the fiscal year 2015-16 on behalf of the Department of National Defence. It is always an honour to meet with distinguished members and colleagues before a committee.
As you mentioned, I have some colleagues from National Defence with me; so if you have any questions specific to their area of expertise, I would ask them to answer and provide the best answer we can to this committee.
The focus of National Defence and the Canadian Armed Forces remains our three enduring roles — protecting Canada's interests at home and abroad, defending North America and contributing to international peace and security.
Defence continues to conduct missions as part of a whole-of-government approach to defending Canada's interests and keeping Canadians safe and secure. These estimates reflect that focus and put defence dollars where they are needed most.
[Translation]
Turning to the Supplementary Estimates (C) before you, I would like to highlight key points for the committee on page 2-52 in the English version and page 2-51 in the French version.
[English]
The bottom line for National Defence resulting from these supplementary estimates is an addition of $191.6 million in funding. This comprises an increase in funding of $221 million, offset by a decrease of $29.4 million for transfers to other departments and other organizations.
The bulk of this increase in spending authority for 2015-16 relates to funding for operations against the Islamic State of Iraq and Syria, called Operation IMPACT. Additional military support for Canada's assistance to Ukraine, known as Operation UNIFIER, is also included in these estimates. The funding for these two operations totals $215.5 million, and that amount excludes $3.4 million in statutory funding.
[Translation]
Mr. Chair, the Department of National Defence and the Canadian Armed Forces continue to maintain strong fiscal responsibility and careful stewardship of resources in recognition of the fiscal environment in which we are operating.
[English]
As we move forward in the new fiscal year, the department will continue to monitor and manage our fiscal requirements to ensure value for taxpayer dollars and support for government priorities.
I would like to thank you, Mr. Chairman.
[Translation]
We look forward to hearing the committee's thoughts on our estimates and to answer any questions you may have.
[English]
Jamie Tibbetts, Assistant Deputy Minister and Chief Financial Officer, Chief Financial Officer Branch, Health Canada: I'm honoured to be here. On behalf of Health Canada, thank you for inviting me to discuss the proposed changes to spending from what was previously outlined in our Main Estimates and the supplementary estimates.
[Translation]
On behalf of Health Canada, thank you for inviting me to discuss the proposed changes to spending from what was previously outlined in the Main Estimates.
[English]
As you're aware, the department has put forward several important initiatives as outlined in Supplementary Estimates (C), which will result in a net increase to our appropriations of $32.9 million. This means that Health Canada's total budget will be raised to about $3.85 billion for the fiscal year 2015-16.
In terms of specifics, the department is seeking $13.8 million in its operating vote 1 funding to maintain health promotion, disease prevention, and health system transformation programs for Aboriginal populations. The vote 10 contribution funding of $98.8 million is for the same programs previously advanced to us through Treasury Board central vote 5, which has been reflected in the Treasury Board Secretariat Supplementary Estimates (B). This is a top- up to that.
This is a renewal of successful programs to provide health services to First Nations and Inuit who are living on- reserve through a range of community-based health programs, such as the Aboriginal Diabetes Initiative, Maternal Child Health, and the National Aboriginal Youth Suicide Prevention Strategy.
Health Canada is seeking funding of $8 million for the establishment of the Thalidomide Survivors Contribution Program to address the Government of Canada's commitment to enhance ongoing financial and health support to thalidomide survivors. These tax-free payments will continue throughout the entire lifetime of each survivor and will be delivered via an independent third party. The total funding of this program will be $50.5 million over the initial six years between 2015-16 and 2020-21, with a 2 per cent annual inflation adjustment. This program has two other components as well: the ongoing, annual benefit and the Extraordinary Medical Assistance Fund.
Health Canada is also seeking funding of $5.2 million in the supplementary estimates for the renewal of the Labrador Innu Health Programs in two remote communities of Sheshatshiu and Natuashish. This funding is to support the delivery of targeted mental health and addictions programs, Maternal Child Health and capacity-building programs that have been ongoing in those two communities.
Finally, Health Canada is seeking $2 million in funding in supplementary estimates for the Canadian Foundation for Healthcare Improvement. Budget 2015 allocated $14 million to the Canadian Foundation for Healthcare Improvement over two years to support applied health research and to support the foundation's work to identify savings and efficiencies in the health system. One of its priorities will be evaluating and disseminating data on best practices with respect to palliative care services.
Health Canada will receive $1.7 million from Indigenous and Northern Affairs Canada to provide mental health support during the pre-inquiry engagement events across Canada. These events are for the consultation with families and victims on the design of the national inquiry into missing and murdered indigenous women and girls. The funding we request in Supplementary Estimates (C) will help us to meet our challenges of today and will better position us for the future.
The Chair: We will go to questions.
Senator Mitchell: Thanks to all for being here. My first question — whether you can specify this or not I don't know — is what is the difference that you expect will be involved in the expenditure of our operations in the ISIL theatre, now that we're no longer going to have jets there, compared to what it would have been had we continued with the jets? Are we saving money?
Mr. Rochette: I was at the parliamentary committee this morning, and the same question was asked. As you know, we have been asking for the Supplementary Estimates (C) for the operation this year of $215 million. That's related to Operation IMPACT and Operation UNIFIER. This is from a budget forecast of roughly $321 million. As you know, the Minister of National Defence announced the new operation for 2016-17, with an estimate of roughly $305 million; so it's pretty much the same amount. On the one hand, we have repatriated the CF-18s, but on the other hand we have brought more military for training. In the end, it balances pretty much.
Senator Mitchell: It's interesting that in your presentation you noted the funding for Operation IMPACT and Operation UNIFIER was for $215 million, excluding $3.4 million in statutory funding. It seems like such a little bit of statutory funding compared to the large amount of $215 million. Could you tell us what the statutory funding refers to in that particular case?
Mr. Rochette: Basically, the statutory funding is expenses that we will incur for military for the benefits that they will receive, such as Employment Insurance or other such benefits. It's related to the salary. For the operations, as you may appreciate, most of the cost is related to flying hours, equipment, renting vehicles, the bombs, fuel and things like that. There's very little cost on the personnel side. Most of the $215 million is related to equipment and other operating expenses.
Senator Mitchell: Mr. Tibbetts, this morning we had public health officials with us. I mentioned the excellent Senate study on obesity done by the Social Affairs Committee, which came out with a variety of recommendations. In your presentation you talked about funding for the Canadian Foundation for Healthcare Improvement. This morning, the answer we received was that the department is considering the obesity report and the impact that obesity has on the health care of Canadians and on health care costs. You haven't specified that as a priority in this presentation with that particular agency. Is it a priority somewhere?
Mr. Tibbetts: With the Public Health Agency of Canada, the promotion of population health-type programming falls more within their mandate than ours, except on the Aboriginal side of business on-reserve. We have Aboriginal Head Start, which I believe you discussed this morning, as well as the Aboriginal Diabetes Initiative, which is clearly linked to obesity. The funding for those programs has been renewed through the supplementary estimates and carried into the Main Estimates. The report is being looked at, as was answered this morning, and will be mostly the Public Health Agency's response, as far as I know.
Senator Eaton: What will it cost to pull out of the bid for F-35s? I don't know what the government will end up doing, but certainly they said during the election that they would can the process. Now we're hearing that maybe they won't can it. Should they go ahead and can it? Is there a cost associated with that?
Mr. Rochette: If I may, Mr. Chair, I will ask our expert on the F-35 project.
André Fillion, Chief of Staff (Materiel), National Defence: I'm an expert on the F-35. We have been a participant in the Joint Strike Fighter Program since 1997. Some annual fees have been charged to each country, the nine partner nations that have taken part in the program, since that time. We are currently under a production, sustainment and follow-on development MOU where annual fees are charged for each participating nation.
Senator Eaton: It means you pay into a pot of money to continue the development of the F-35.
Mr. Fillion: The MOU is for the production, sustainment and follow-on development. There is a formula for each partner nation whereby their annual fees are derived based on the notional number of aircraft that each air country would take. For example, in Canada we're talking about approximately 2 per cent of the non-recurring cost associated with the production, sustainment and follow-on development. This participation gives us insight into the program and gives Canadian industry an opportunity to participate.
Senator Eaton: To bid on it.
Mr. Fillion: Exactly. So far, the latest figure is in the region of $750 million in contracts issued to Canadian firms. That is the status. We're continuing as a participant in the program as of today.
Senator Eaton: If the government decides that it no longer wants to participate, will those contracts be cancelled? Do we have to pay a penalty, or do we just back off gently?
Mr. Fillion: There are clauses in MOUs regarding participants who decide to terminate. They basically say that there would be negotiation with the other participants regarding the withdrawal from the MOU.
The Chair: A breakup fee; is that what you're saying?
Mr. Fillion: Certainly a negotiation would occur with the other participants should Canada decide to leave the MOU.
Senator Eaton: We've heard and read in the newspaper that there will be cost overruns with the shipbuilding project that we're now undertaking. Is the money there? Has it been reprofiled from other years to pay, or will we see additional costs surfacing in future budgets for the navy overruns?
Mr. Rochette: Basically, when they did the cost estimate for the CSC, the Canadian Surface Combatant, at the time, 10 years ago or so, the estimate was roughly $26 billion. Of course, this was done at the time when they had little information. It was really a parametric cost estimate based on little information. Of course, now that we are studying what we are looking for, the type of ship, what we need to have as capabilities for these ships, we will have to prepare the cost estimate for that and then present the cost. I can expect that the cost will be higher, just due to the fact that it was 10 years ago now. With the inflation rate and everything, we can expect that.
Senator Eaton: Do we have money reprofiled for that somewhere? Because I remember, in past years, the question would arise: Ah, but you didn't spend the money that was allocated to Defence. Was that money reprofiled, and is it sitting there waiting to pay for the ships? Or is there no money there?
Mr. Rochette: Thank you for your question. The funding for National Defence is a bit different from the funding for other departments. Not many departments will have their appropriation for vote 1 operating and vote 5 capital in year. National Defence, in addition to having our appropriation, also has accrual funding, as we call it, in the fiscal framework, for the large projects just because of the size of the equipment and the cost of the equipment. It's already earmarked, so we have $104 billion earmarked for the next 20 years.
Senator Eaton: Oh, it's banked.
Mr. Rochette: Yes, in the fiscal framework. So we have already earmarked, of that $104 billion, $26 billion.
Senator Eaton: May I ask one question?
The Chair: Please go ahead.
Senator Eaton: Mr. Tibbetts, we are talking about $98.8 million for a range of health services, the Aboriginal Diabetes Initiative, the Maternal Child Health program and the National Aboriginal Youth Suicide Prevention Strategy. We heard this morning about the Head Start. Do you have some form of accountability or data showing how effective this money is being and how many people it is helping?
Mr. Tibbetts: Indeed, we do. In that $98 million, there is a renewal of $5 million as well for that program, bringing the total funding for Aboriginal Head Start up to about $47.7 million in total. It is recognized as kind of a model for early childhood development in Canada. It reaches—
Senator Eaton: We heard that one this morning. I'm more interested in the diabetes program.
Mr. Tibbetts: Oh, the diabetes program. Sorry, I thought you were talking —
Senator Eaton: Or the suicide prevention strategy.
Mr. Tibbetts: Part of the $98 million goes to both of those initiatives as well. There's $46.8 million of the $98 million that is for the Aboriginal Diabetes Initiative. Its aim is to reduce Type 2 diabetes for First Nation and Inuit people.
Senator Eaton: Do you keep data once the money goes out the door and goes to those various programs across the country, I guess, or just northern communities?
Mr. Tibbetts: Yes.
Senator Eaton: Is it working?
Mr. Tibbetts: Our indicators show that the gap is being reduced. In our Report on Plans and Priorities this year, when I was here last time in 2013, there was some discussion here about the indicators we have to measure the progress on this, and we've put a lot of effort into trying to put these into our RPP and our DPRs. You'll see them when you get an opportunity. As to the health gap, when surveyed last year, 57 per cent of Canadians said their health is in either excellent or very good condition. For First Nations, in the same year, it was 45 per cent. That used to be in the mid- thirties as early as 2002-03. So the gap is closing. Diabetes progress is there. It's a lifestyle issue as well.
Senator Eaton: Oh, I know; I understand. It's hard because food is hard to find in the North.
Mr. Tibbetts: We are servicing over 400 communities with this program, though, and there are 440 community health care workers dedicated to the Aboriginal Diabetes Initiative through this program.
Senator Eaton: Do you ever set goals when you give money or when money leaves you and goes to one of these communities? Do you ever say, "Okay, last year you were 50 per cent; this year we'd like it to be 55 or 53 per cent?'' Do you try to set goals?
Mr. Tibbetts: Yes. It is done through our contribution funding arrangements, which are usually block funding. We put a number of programs together. They are based on a community health plan. It gets hard to generalize at times. Some of the communities, like Davis Inlet for instance, have more hands-on kind of work, where other communities in Alberta, Manitoba and places are quite well run. They have effective health care services and authorities running them. We sit with them and help to develop a community health plan. That is how funding goes to the priorities in the community. In there, we get reporting on program results and financial reporting to make sure that the funding is going to the purposes for which it should be used. As to the indicators, we do have a lot of dashboard-type indicators that come in through these processes. We are trying to make sure that you get them through these RPPs and DPRs in the future. You'll see them laid out — some specific indicators against all of these programs.
Senator Eaton: Because I think that's somewhere we want to go on this committee, isn't it? Accountability and data for all the money that we spend.
Mr. Tibbetts: I agree.
The Chair: If you had actual 2013-14-15 results that you could send to us, get it to us. Part of the problem we have sometimes is that we ask various groups and departments for feedback, and we ask them two and three and four times. I'm not saying this has happened in your case, but are you able to give us some results? Because what we're trying to do is tie actions with results so that people really are accountable.
Mr. Tibbetts: As CFO, I couldn't agree with you more.
The Chair: If you could get something to our clerk, Gaëtane, that would be really helpful.
Mr. Rochette: We also do evaluations.
The Chair: Even if you précised it. The thing, honestly, as a business guy, that bothers me is when I get bricks. I like to have two pages, bang, bang, bang, what the actual statement is, so that we can see it and it's clear and easy to understand. I know the government is different. I recognize that, but I'm sure that there are many people that are really trying to streamline this as much as we can.
Senator Marshall: My first question is for National Defence. I'm looking at the Supplementary Estimates (C). I'm looking at the amount there for Operation UNIFIER and Operation IMPACT, and it is giving us a total of $215 million. Would you have to split there between the two?
Mr. Rochette: Of course, we do have a split. So basically, the total cost for Operation UNIFIER is $7.1 million. This includes $300,000 for statutory payment.
Senator Marshall: What would we be doing? I'm interested in Operation UNIFIER. What would we be buying? What are we paying for with that amount of money?
Mr. Rochette: I can let my colleague Major-General Madower talk more about the military aspect, but to provide an overview of what we do, in this operation, we do countering improvised explosive device training and improvised explosive device defeat training. We provide medical training and equipment, logistic training and flight safety training. Really, it's all related to training.
Senator Marshall: So would these be things that we would not know about until later in the year? At what point in time did the department become aware that this is something that the government should commit to and fund? Is that something that was at the tail end of the fiscal year or early on?
Mr. Rochette: Basically, that was approved for the beginning of the operation, but National Defence, considering the size of its budget, can cash manage the operation in year. So for Supplementary Estimates (A), basically, we were asked to submit our estimates for very specific things. For National Defence, we asked for funding under the infrastructure stimulus program.
For Supplementary Estimates (B), that's where we were supposed to ask for the funding, through these estimates. Basically, we were asked to ask funding only if we needed to have funding for operation provision to bring back the refugees. National Defence did not ask for any funding there, so we did not have anything in Supplementary Estimates (B). Supplementary Estimates (C) was the last estimates of the year where we could ask for the funding.
Senator Marshall: What about all the transfers that show up in the supplementary estimates? There are quite a few transfers going out to other departments. Why would all of these projects be budgeted in National Defence, and why would they not be in the department that eventually gets money? Why does it start out in your department?
Mr. Rochette: Thank you very much for your question. Basically, we have 19 transfers throughout the Supplementary Estimate (C). Three of them are funding that we are receiving from other departments to National Defence to do some work for them. The other remaining 16 are National Defence, that they are sending funding.
Senator Marshall: They're going out.
Mr. Rochette: Most of the time when we have these types of transfers, it is because the decision that was made to reimburse the department was made after we prepared the Main Estimates. Therefore, it was not part of our Main Estimates. We have to ask the funding in the year for the first year that we ask for the funding. After that, it will be part of the Main Estimates.
For example, we have two of the transfers here. It's for our mission abroad. We have four positions where we have liaison officers that we are sending to different embassies. I'm looking for the new name now: GAC. They are basically providing all the support for personnel in embassies. Because it's the first time for a new position that we just created for this year, we are transferring funding to them through the supplementary estimates. Next year it will be part of the Main Estimates, and we won't see that.
Senator Marshall: What it looks likes to me is that you have a lot of money left over at the end of the year, and now you're trying to get rid of the money.
Mr. Rochette: No, ma'am.
Senator Marshall: That is not what is happening? Okay.
There are a few there that I wanted to ask specifically about. The one about the Carling Campus refit project, is that here in Ottawa?
Mr. Rochette: Yes, ma'am.
Senator Marshall: That seems like a lot of money, $8.7 million, because it's for information technology infrastructure and equipment. It seems high.
How far along is that project? Is that on schedule and budget? What is your experience with regard to projects that the department undertakes?
Mr. Rochette: I will say that it's on target, but if I'm not correct, I'm sure Major-General Madower will correct me. This project is basically provided by Public Works. They are providing the support for us.
National Defence is located in 40 locations in Ottawa. The aim of that project is to move to the building on Carling and to transfer 8,500 people to that location. It's to consolidate the people in the same location. By doing this, we expect to save the Government of Canada roughly $900 million overall. Of that, $750 million will be savings coming from the reduction in locations. Because Carling is outside the downtown core, the cost for rent is lower. It will be savings of $750 million over 25 years. DND will also have cost avoidance of roughly $160 million.
Senator Marshall: What you're saying is the project is on schedule and on budget. Sometime in the future, when you come back, we can see whether the $900 million actually materialized.
Major-General John Madower, Chief of Programme, Vice Chief of the Defence Staff, National Defence: Senator, what I would interject is that there are three phases for the project between 2016 and 2019. The first phase is delayed by six months because there were some issues with the facilities, but the intention is that phases two and three will be on time. Basically, there is a delay to phase one, and it slides into the phase two time frame, so essentially the project will be completed on time.
The Chair: Senator Campbell, would you like to ask a question? Then we'll ask our two groups to give us a little overview on estimates, so we use our time effectively.
Senator Campbell: You list four programs in the supplementaries for First Nations and Inuit living on-reserve. First of all, I didn't know that Inuit lived on reserves.
Mr. Tibbetts: They don't.
Senator Campbell: Okay. That's good. I was a little confused there.
Are there any other programs included in this, or is all the funding going for these specific programs?
Mr. Tibbetts: I'm not sure I understand the question.
Senator Campbell: There is $98 million going for programs, and the range of the programs that you have, such as diabetes, maternal health. Are there any other programs that aren't listed here? You have four of them listed here.
Mr. Tibbetts: Yes, there are. I understand. Quickly, Inuit people do not live on reserves. When we say "First Nation and Inuit'' in our descriptors, it means the program is offered to both peoples, populations.
Senator Campbell: Okay.
Mr. Tibbetts: Sometimes you will see "First Nations'' only in our descriptors. That would be mostly south of 60 programming. There is some nomenclature there on results as well.
There are about five programs that that money goes towards. We call it upstream, because it is supposed to improve upstream health results. There is money for the Aboriginal Diabetes Initiative. There is money for the Aboriginal Head Start On Reserve component. The Public Health Agency was here today talking about the off-reserve component, I believe.
Senator Campbell: Yes.
Mr. Tibbetts: The Maternal Child Health program. The National Aboriginal Youth Suicide Prevention Strategy, which is $13.5 million, and the Aboriginal Health Human Resources Initiative, which is actually trying to encourage young Aboriginal people coming up to go to school and become health care professionals.
Senator Campbell: That actually is in your mains, right?
Mr. Tibbetts: Yes, it has been. It's a renewal of that program actually. And the Health Services Integration Fund, which is funding to help service integration.
Senator Campbell: In British Columbia, we have the First Nations Health Authority, which is unique and probably a model. Monies from this flow into the First Nations Health Authority to take care of First Nations in British Columbia.
Mr. Tibbetts: Yes. I've been around the department now for many years. I was involved in the initial negotiations and establishment of the First Nations Health Authority.
The agreement is quite complex, as you likely know. The funding that went into their agreement from the federal side was based on the appropriations that Health Canada had at the time when we negotiated. These programs were part of that.
The agreement does call for renewal, I think at the five-year point, maybe six-year point. It's a 10-year agreement, but at the five-year point, any new programs that may have come on board during that time, we would then make some sort of correction, or we could reopen as we went.
Senator Campbell: You would review it at five.
Mr. Tibbetts: Correct. We would do it annually if something brand new came out. These programs were around at the time of the negotiation. They do have significant growth indicators on their funding. It's quite a positive agreement.
Senator Campbell: Yes. Thank you very much.
The Chair: Maybe, Mr. Rochette, you could start with a little intro on the Main Estimates, followed by Mr. Tibbetts.
Mr. Rochette: Thank you again, chair and senators. It's time for the opportunity to present the Main Estimates for fiscal year 2016-17 on behalf of the Department of National Defence. My colleagues and I look forward to reviewing this important information before the committee.
[Translation]
It goes without saying that the magnitude, complexity and visibility of the National Defence budget demand a cohesive, comprehensive and strategic approach to maximizing the efficacy of our expenditures and investments. A great deal of effort is devoted to delivering strong fiscal responsibility and prudent stewardship of our resources, especially given the fiscal realities and operational challenges we face.
These Main Estimates reflect a determined and comprehensive effort to direct and allocate National Defence dollars responsibly and appropriately across a broad spectrum of related activities in support of defined corporate priorities during fiscal year 2016-17.
Turning to the Main Estimates before you, I would like to offer highlights for your consideration, focusing on the overall changes from year to year on page 2-169 in the English version and page 2-164 in the French version.
[English]
The bottom line for National Defence is a net reduction of 1.6 per cent or, if you prefer, $301.8 million, from the Main Estimates figure approved for fiscal year 2015-16. If you prefer, the Main Estimate was reduce from $18.9 billion to $18.6 billion. This net change reflects both increases and decreases across the department's vote structure, which I will summarize in four points.
First, the operating budget, vote 1, will increase by 2.1 per cent or $281.5 million. This is mainly attributable to the 2 per cent defence escalator announced in Budget 2008 and to allocations from the federal infrastructure investment plan. Second, the capital expenditure, vote 5, will decrease by 15.5 per cent or, if you prefer, $625 million, due primarily to a decrease in spending on major capital equipment and infrastructure projects to align financial resources with current project timelines. Third, the grant and contributions, vote 10, will decrease by 2.5 per cent or, if you prefer, $4.2 million, to reflect the transfer of the National Search and Rescue Secretariat from National Defence to Public Safety Canada. Fourth, the statutory allocation will increase by 3.06 per cent or $45.9 million in light of an adjustment to employee benefit contributions.
[Translation]
Mr. Chair, the Department of National Defence and the Canadian Armed Forces continue to deliver results under an essential national mandate while embracing fiscal responsibility and effective stewardship of resources.
[English]
As chief financial officer, I am fully engaged in the governance of defence resources, working in close collaboration with my colleagues in the military and my civilian counterparts to deliver successful outcomes and value for taxpayers' dollars.
I would like to thank you, Mr. Chair. My colleagues and I would be pleased to address any questions or comments that this committee may have.
Mr. Tibbetts: Thank you once again for inviting me to discuss the Main Estimates for Health Canada. Health Canada is dedicated to helping the people of Canada maintain and improve their health. The department's Main Estimates outline approximately $3.8 billion in spending authorities for 2016-17, representing a net increase of $97.8 million from 2015-16. Health Canada's estimates are about 65 per cent to 70 per cent related to Aboriginal spending. Most people don't understand that the large slice of our funding is to support these important issues in Canada as the provinces manage the health care system for the majority of us.
In terms of specifics, I would like to provide you with details of some important initiatives that support the government's priorities. Health Canada remains focused on providing services that are important to Canadians, including access to quality health care services for First Nations and Inuit. An amount of $114.4 million has been allocated to a range of community-based programs for First Nations on-reserve and Inuit, such as the Aboriginal Diabetes Initiative, Maternal Child Health, the National Aboriginal Youth Suicide Prevention Strategy, the Health Services Integration Fund and the Aboriginal Health Human Resources Initiative. Also, an increase of approximately $83.5 million has been provided for growth to offset inflationary costs to deliver Aboriginal programming, including those for Non-Insured Health Benefits, which is over $1 billion in our estimates in total.
As well, the Government of Canada, British Columbia First Nations and the Government of British Columbia have worked together to implement the British Columbia Tripartite Framework Agreement on First Nation Health Governance. As of October 1, 2013, the First Nations Health Authority assumed full responsibility for the design and delivery of health services for First Nations people in British Columbia. There is an increase to their agreement in these estimates of $16.9 million for growth in areas such as non-insured and primary care, which they now provide.
In Budget 2015, the Government Canada announced an investment of $14 million for the Canadian Foundation for Healthcare Improvement in support of applied research and the foundation's mission to identify savings and efficiencies in the health care system. Also, other initiatives in our supplementary estimates previously mentioned are also part of these estimates, such as $8.2 million to establish funding for 2016-17 for the Thalidomide Survivors Contribution Program and $5.4 million to continue the work under way with Labrador Inuit health programs.
The proposed spending in our estimates will ensure that Canada can continue to focus on important health priorities that are designed to result in better health outcomes for Canadians.
The Chair: We will go to questions.
Senator Marshall: In the Main Estimates, about 50 per cent of the funding for health is listed under grants and contributions. What kind of system would you have set up for the disbursement of these monies? There must be a separate division within the department because some of the amounts are quite large. Who decides who gets how much money? What is the reporting back? Is there any audit? What kind of accountability mechanisms do you have?
Mr. Tibbetts: I would like to answer that in two parts. First Nation business can be quite different than the funding you will see under our strategic outcomes with regard to funding what we call a pan-Canadian organization.
Senator Marshall: Yes.
Mr. Tibbetts: Internal controls are solid. As an auditor, you are quite familiar with internal controls over reporting processes. We meet and sustain an ongoing monitoring of those. My departmental audit committee and others look at these as an internal audit is done. Every year we do a key controls audit. We do systems audits on our internal practices to ensure that we actually meet private sector accounting control mechanisms.
Senator Marshall: Would it be the same organizations every year or primarily the same organizations every year that receive the funding?
Mr. Tibbetts: For First Nations, yes. We fund close to 1,000 different organizations, including about 650 First Nation organizations and their health authorities through contribution funding. Much of it is in ongoing multi-year agreements for ongoing services. We have a government-to-government relationship with some of these bands and others to ensure ongoing health care services on-reserve. About 75 per cent of these organizations have clean audit statements.
Senator Marshall: Okay.
Mr. Tibbetts: They are considered low risk in our general risk assessments of them. We are in kind of five-year block funding agreements such that they can move money around based on the community health plan I mentioned earlier. Others are targeted agreements under which you have to do specific things.
There is a line in the Main Estimates just on infrastructure funding, which is done another way as it's based on assessments of the quality of these facilities.
Senator Marshall: Progress reports.
Mr. Tibbetts: It's done province by province with different organizations. How we would do it in Alberta would be different than on the East Coast, for example, depending on chiefs, leadership and governance mechanisms.
Senator Marshall: The first three relate to First Nations and Inuit health. The $645 million is a large amount, so it must be targeted to different communities. Is that how it works? You mentioned Sheshatshiu in Newfoundland and Labrador. All of these amounts would be targeted to certain communities.
Mr. Tibbetts: Yes. There is not that much flexibility in them, either, because we have multi-year agreements around them, mostly five-year agreements. The organizations have a planning horizon. Can they use more? Certainly, in some areas; there are always more priorities, but we work with them. We respond to emergency situations as needed.
Senator Marshall: Would you have information that would indicate how much goes to each community?
Mr. Tibbetts: Absolutely. It's on our website.
Senator Marshall: That's available. Thank you.
Mr. Tibbetts: In my organization, any contribution we make over $10,000 —
Senator Marshall: Would be listed publicly.
Mr. Tibbetts: — is listed quarterly on our website.
Senator Marshall: The last question I have is on the Thalidomide Survivors Contribution Program, the $8 million. Some funding must have been provided the previous year for that?
Mr. Tibbetts: Yes. I was heavily involved in that. It was quite a remarkable time, actually, trying to meet the government's commitment quickly. We provided one-time funding to the 92 individuals, give or take one or two, who were identified as thalidomide survivors from whatever year it was done. I think it was a $125,000 one-time payment, tax-free.
Senator Marshall: That was disbursed already?
Mr. Tibbetts: About a year ago. This $8 million in supplementary estimates is the 2015-16 payment and the $8.2 million that you see in Main Estimates will be the 2016-17 payment based on a triage of three creditors of Health —
Senator Marshall: That would be for support services and things of that nature?
Mr. Tibbetts: It's actually a one-time payment for them to take care of themselves, based on $25,000, $75,000, $125,000, depending on where the individual is in terms of requiring treatment and support. Some are in a very difficult condition; others are less so. A third party makes that determination.
There is a $500,000-a-year emergency fund for people if they need to retrofit a vehicle. They can apply for that as well.
Senator Marshall: I know the distinction between budgetary and statutory, but the statutory in National Defence is quite a large amount. Do you have any information on what's in the $1.3 billion?
Mr. Rochette: Basically, statutory forecasts provide a more detailed list, if you will. Items such as a contribution to employee benefit plans for the members of the military, a contribution to employee benefit plans for the civilians. We have payments under the Supplementary Retirement Benefits Act.
Senator Marshall: These are all human resources benefits.
Mr. Rochette: Yes.
Senator Marshall: The full $1.3 billion relates to payments for human resources?
Mr. Rochette: Most of them. We have some, for example, the Associate Minister of National Defence — his salary and motor car allowances. We are talking roughly $82,000. This is part of the statutory as well, because it's not voted.
[Translation]
The Chair: Mr. Fillion, we have briefly talked about the F-35s.
[English]
You had mentioned that nine nations pay production development annual fees, 2 per cent of the non-recurring costs, and you have about $750 million in contracts. We have an annual fee we have paid yearly since 1997; is that correct?
Mr. Fillion: It's a contribution to the partnership. The word "fee'' may not be the right term in this case.
The Chair: Or contribution?
Mr. Fillion: It's a contribution based on a composite share ratio. It's basically sharing the financial costs among the partnership based on the number of aircraft that each nation will buy compared to the total number of aircraft.
The Chair: How much have we spent to this point since 1997?
Mr. Fillion: There have been three MOUs. The first MOU was in the late 1990s where the concept development phase was being initiated by the U.S. government and a competition was run. Then a development MOU was signed in the early 2000s, which will end in a couple of years; then the production, sustainment and follow-on development MOU, which is longer term and looking at the production and sustainment of the aircraft.
So far the contribution for Canada is just above $300 million since the beginning of the participation.
The Chair: Like they say in business, we have skin in the game; right? That means a significant amount of money has been invested into this project.
Mr. Fillion: We've been a participant since 1997. Again, it has given Canada visibility on the program and Canadian industry the ability to participate in the Joint Strike Fighter Program.
The Chair: General, you may have knowledge of the procurement part, but where are we with procurement with this project?
Mr. Fillion: The Royal Canadian Air Force is still working on what we call the options analysis. This project is in the options analysis phase, where the capability, efficiency and operational requirements are developed and options are developed in terms of going forward in partnership with the Materiel group, which I am part of, as well as the other departments involved: Public Services and Procurement Canada, and Innovation, Science and Economic Development Canada. The options analysis is ongoing as we speak, and options are being considered.
The Chair: I guess it was last year, and I'm not sure which one of you gentlemen told us you had formed a committee with Public Works and Defence, and a committee has been formed to oversee the procurement; is that correct?
Mr. Fillion: You may be referring to what was called at the time the National Fighter Procurement Secretariat, NFPS, which was formed as the seven-point plan was initiated in 2012-13. The secretariat no longer exists officially, although with the Defence procurement strategy that was initiated almost two years ago, there is formalized governance for all procurements, not just this one and others, but the governance at the DM level. The deputy minister assists the director general —
The Chair: Where are we going with the process, in your mind? How long will it take for the actual production, if we make that decision, to take place? What will be the final number?
Mr. Fillion: It will depend on the option selected. Again, the project is in options analysis.
The Chair: When do you foresee some form of decision, if you had to guess?
Mr. Fillion: I'm not guessing or speculating.
The Chair: I didn't mean to pull you closer to the edge of the building.
Mr. Fillion: No, senator. It's a good question, but I can't answer because it depends on the options and so many other factors.
Senator Eaton: When does the government vote its next payment?
Mr. Fillion: The payments are typically done in the middle of the U.S. fiscal year. The U.S. fiscal year spans from October 1 to September 30. Our next payment for the current U.S. fiscal year is due in May.
Senator Eaton: So this year in May?
Mr. Fillion: For the current U.S. fiscal year.
The Chair: With the change in policy that we've initiated in the government, with pulling out our jets and going with more of a support program, how does that affect the numbers in your estimates moving forward? There's the money, but then there's the operational element. What changes do you have to make to go from a battle-ready situation to more of a training-type situation?
Maj.-Gen. Madower: It's an unusual circumstance. Prior to deployment, not just in a fighter fleet but in any fleet, you have to be able to respond to a number of different potential situations. So the training level is very elevated in a number of potential scenarios.
When you're deployed, oftentimes, although it's in combat and it's in harm's way in many cases, the types of missions that you are performing are very constrained. What we'll see with the fighters, and often we see with many of our aircraft, whether it's the ships or our army folks, when they return back, the training actually becomes more intense than when they were deployed. That's not to say that the work is harder, because obviously in a combat theatre it's exceptionally challenging, the most intense that we will ever experience, but the breadth of things that you have to be prepared for before you deploy is a lot broader. So it's counterintuitive, actually.
The Chair: With our change of policy or change of plan on the ground, originally we had about 69 people on a training mission to work with the various groups in Iraq, In Syria, we now have a ceasefire. I understand that. Under the new program that we're to participate in, we'll have more resources and a different approach. What does that mean to the numbers you put into your estimates? Is there a change in those numbers? Have you forecast those numbers? Because that decision was taken only in the last month or two. Would that affect your latest estimates in terms of some of your various budgets?
It took me about four hours to go through the document. It's very complete in terms of each category and each segment of each category, the numbers of personnel, et cetera. I'm just trying to get a sense of what this does. Will there be any impact on your numbers going into fiscal year 2016-17? Will you be coming to us with Supplementary Estimates (A), Supplementary Estimates (B) and Supplementary Estimates (C)? It's a negative question.
Mr. Rochette: I will come back in supplementary estimates to ask for the funding but not because we have changed the plan. Basically, we look at Operation IMPACT mainly on a yearly basis. The funding that we have been asking for this year is based on the forecast, a cost estimate based on the operation for this year.
We just received approval for the extension for next year, but with removing the F-18 and having more boots on the ground with more soldiers and trainers and because we're outside the Main Estimates that have been tabled, I will have to come to the supplementary estimates to ask for funding for that operation.
Operational decisions are made almost on a yearly basis, so it's rare to see that. If the government decides we're going to be there for 10 years and guarantees funding for those 10 years, then it would be in the Main Estimates. If not, when it's on a yearly basis, then we ask for the funding in that year.
The Chair: It's a new program with just a one-year commitment, or will it be a longer-term commitment?
Mr. Rochette: Right now the cost estimate that we're looking at from National Defence of $305 million is for a one- year commitment.
[Translation]
The Chair: Can that change?
Mr. Rochette: Yes, that can change in the coming years.
[English]
The Chair: General, maybe from an operational perspective, could you give me the top three issues, the most important issues, that you face or that the forces face moving forward? I know it's a tough question to ask, but just to see where the thought process is.
Maj.-Gen. Madower: Right. Obviously, the first two are pretty straightforward. First is Operation IMPACT, our expeditionary operation that we've spoken about quite a bit. Second is Operation UNIFIER, basically focusing on NATO and stability in Eastern Europe. Those two are our top priorities. Then, of course, I would say that the third is ensuring that we conduct our domestic tasks, like NORAD missions and search and rescue and the like. That's the ranking.
The Chair: Where does Arctic sovereignty come into this?
Maj.-Gen. Madower: Obviously, Arctic sovereignty is a critical element that goes along with our NORAD mission. Of course, the priorities of the government are the defence of Canada, defence of North America and expeditionary missions, in that order. Essentially, our day-to-day mission focus and the most challenging aspects are Operation IMPACT, Operation UNIFIER and our traditional everyday routine tasks critical to Canada.
The Chair: We read in the papers the fact that you're undermanned. Is that accurate in terms of the military? We are short some numbers of people, and our reserve group is down. I guess as a side question, are we going to staff up and add some more people? There seems to be some bureaucracy that impedes young people from having an opportunity to join the forces.
Maj.-Gen. Madower: You're absolutely right, Mr. Chair. Our current numbers are around 66,000 in the Regular Force. That's indicative of all three dimensions of our defence team, Regular Force, Reserve Force and civilians, as a matter of fact. We are below our authorized values. In fact, this Thursday we're having an off-site hosted by the Chief of the Defence Staff and the deputy minister to speak to that very issue and ensure that we have a focused, unified, coherent way forward to address that.
Certainly, our priorities internal to the department are not only to staff up to our authorized numbers but also to ensure that the department as a whole and the Canadian Forces are oriented to the current security challenge that we face in the country. There are emerging capabilities that we need to invest in that weren't there many years ago, such as cyberdefence and the like. It's a case of ensuring that as we increase our staffing of military and civilian members, the structures are adjusted so that we are properly orientated.
Senator Mockler: Your expenditures for health for 2016-17 contain some differences in your votes. I wonder if you could explain a few of those differences. This would be under Environmental Risk to Health. In 2015-16, you had $100.2 million, and for 2016-17 there's a drop to $70.8 million. Why such a drop at a time when we need to be cognizant of the fact that there are risks?
Mr. Tibbetts: You're quite right; there is a drop. They're for specific programs that sunsetted at the end of the 2015- 16 fiscal year, including the Clean Air Regulatory Agenda for $19.5 million, the Federal Contaminated Sites Action Plan for $2.4 million and the Climate Change Adaptation Program for $1.3 million; as well, there was a decrease in funding for the Chemicals Management Plan. Those are four key programs in those areas that have shown a lot of results. The government is currently looking at these programs and their potential for renewal in part or in whole or expansion. They're part of the normal, cyclical five or six years of programs that sort of go through the process of renewal. They're not in the mains yet. I would hope that's done in the future. I will be back with my colleagues to talk to the chair about supplementary estimates in these areas.
The Chair: You're excited to see us again, Mr. Tibbetts.
Mr. Tibbetts: Always.
Senator Mockler: You agree, Mr. Tibbetts, that there is basically a reduction.
Mr. Tibbetts: There's a $30 million reduction for the opening Main Estimates, yes.
Senator Mockler: The next question is on Anti-Drug Strategy Initiatives. In 2015-16, you had $22.7 million, and there's an increase to $26.3 million. Why is there an increase, and in which part of Canada do you have those initiatives? And who delivers those initiatives?
Mr. Tibbetts: This is a grant to the Canadian Centre on Substance Abuse, and they do this. It's a consolidation of a class of contributions that we had in the past. They're delivered through that organization.
The Chair: Last question. We need one more question for Senator Campbell after you.
Senator Mockler: Thank you, chair. Official languages and minority community development:
[Translation]
Can you explain the role of Société Santé en français within and outside the province of Quebec?
Mr. Tibbetts: Outside Quebec?
Senator Mockler: Yes. What role does Société Santé en français play within the department?
[English]
Mr. Tibbetts: I may have to get back to you on that specifically as far as the detail of their mandate and role. It is about health care professionals being able to provide services in the minority language in Quebec, as well as outside of Quebec. There is an evaluation of this program that's on our website as well. So I can get back to you with more information on that, but it is the ongoing work in this area. It's laid out in our Report on Plans and Priorities as well; there's a section specifically on that.
May I make a correction to the question of Senator Marshall?
The Chair: Certainly. Please go ahead.
Mr. Tibbetts: I mentioned that the three levels of support for the thalidomide survivors were based on disability, which is all true. I said it was $25,000, $75,000 and $125,000. It's actually $25,000, $75,000 and $100,000. It's subject to annual inflation of 2 per cent, so it will increase until they pass away. I confused it with the one-time $125,000 payment.
Senator Marshall: How many survivors did you say?
Mr. Tibbetts: There were 92 at the time. Others have come forward and will be assessed to see if they meet the criteria that were established in 1991 by the government at the time.
The Chair: Thank you, sir. Senator Campbell, last question for this group.
Senator Campbell: How much does the Canadian Centre on Substance Abuse get?
Mr. Tibbetts: It would be that full line amount.
Senator Campbell: The $26 million.
Mr. Tibbetts: Yes.
Senator Campbell: How do you measure what they're doing?
Mr. Tibbetts: In the contribution agreement, there's an agreement for what they would do with the funding.
Senator Campbell: Do you measure it?
Mr. Tibbetts: They publish it, and we have done evaluations on it. We get financial reports from them and program reports back through our strategic policy branch, which manages the contribution funding on an annual basis.
Senator Campbell: Can you send me basically how you monitor that $26 million? It seems like an awful lot of money, and I'd like to know what the successes are, exactly how it is stopping the use of drugs
The second question I have is who decides on this sunsetting for environmental risk. Is it the health ministry? Is it the health minister? Is it the government? Are we looking at a process where a previous government said, "We're going to sunset these for whatever reason?'' They have every right. I'm not arguing with that. "We're going to sunset these to the tune of $30 million.'' And then there's an election; another government comes in and says, "We didn't want those sunsetted. In fact, we ran on some of these.'' That brings you back here again.
How much input do you have into this to say, "This program really works''? How much leeway do you have on that?
Mr. Tibbetts: We have a fair bit of influence, actually. It's based on its results, if you're getting positive results. The Chemicals Management Plan, for example, was originally established to test 2,000 or 3,000 chemicals in the environment. As they get to the end of that work, you would adjust it. The process is that you get into a budget exercise, basically. You come in with a memorandum to cabinet, and it's a cabinet consideration on whether the government wants to continue these things. Then Treasury Board submission. Then, it's put into estimates. There is a batch of these programs that do go through that.
The Aboriginal ones we spoke about earlier have been renewed. We're in that same cycle. They've been renewed ongoing, without the need to come back, because of the criticalness of them. It will be interesting to see how the government goes through the assessment of the environmental risk pieces over the next few months.
Senator Campbell: If you could send me that stuff on CCSA — how they're monitored and how we measure their success — I'd be very thankful.
The Chair: Wrapping it up, Mr. Tibbetts, your three challenges are what?
Mr. Tibbetts: My three challenges?
The Chair: Yes, your department.
Mr. Tibbetts: This is one of them.
Senator Campbell: No. This is an opportunity, not a challenge.
Mr. Tibbetts: As the CFO, my job is not just chief bean counter; it is really about program results. I do the corporate risk profile for the department and run that with the executive team. So we have had challenges, in the past, around contribution agreements with First Nations, as you mentioned. These are no longer on our corporate risk profile. They've come down because we've been able to put practices in place so that we're more comfortable with them. There is the challenge around integrity of our brand to make sure that Canadians trust that when Health Canada says something is safe and effective, it is. There are always issues there, I suppose, but I think, for the most part, Health Canada is a trusted brand. That's a challenge to maintain or an opportunity.
There are the First Nations issues. I've been in government for 35 years almost, and 20 years of it has been around First Nations and Aboriginal issues. It is an ongoing challenge for this country. I would give that two of the three. It's important that we continue to do this on a community-by-community basis. When we manage contribution agreements, as you asked earlier, you cannot do it in Ottawa. You do need to do these things out on the front line. I think a third would be nursing. We have a large requirement for nurses to be in remote communities — they are basically almost the doctors in these communities — making sure that they have the capacity and support to deal with the ongoing requirement and the growing populations in these areas.
Those would be the three I would mention.
The Chair: We look forward to following up on some of these issues when we get together next time. I thank you, gentlemen, for coming in today. We'll be anxiously awaiting getting back together with you and talking more. Thank you.
We have our next group, Infrastructure, coming right in.
[Translation]
Colleagues, we now have two other officials from Infrastructure Canada: Darlene Boileau and Ms. Pham.
[English]
Ladies, welcome to the committee. We understand that you will present first on the Supplementary Estimates (C), followed by a short question period. Secondly, you'll have remarks on the Main Estimates. May I suggest we go right through Supplementary Estimates (C) into Main Estimates because there will be overlap, possibly, on some of these things from an operational perspective? Madam Boileau, you're the spokesperson. Would you like to start?
Darlene Boileau, Assistant Deputy Minister, Corporate Services and Chief Financial Officer: Thank you for inviting both of us today to talk about infrastructure. I'm going to have to adjust my speech a bit in light of your direction, chair, so please follow with me as best you can the text that you have in front of you.
The Chair: Not a problem.
Ms. Boileau: I'm going to go right in and speak to Supplementary Estimates (C). In front of you, you have our Supplementary Estimates (C) for fiscal year 2015-16. Infrastructure Canada is seeking a net increase of $61.8 million in the supplementary estimates. This would bring the total funding available in 2015-16 to close to $3.8 billion.
[Translation]
Most of the additional requirements for Infrastructure Canada through Supplementary Estimates (C) are as a result of funding approved further to the signature of the project agreement for the new Champlain Bridge corridor on June 19, 2015.
[English]
This critical project is on budget and on time. As you will recall, the timelines for this project are extremely ambitious, with the new Champlain Bridge to be in service in December 2018 and the rest of corridor to be in service in October 2019. These timelines were put in place to ensure the continued safety of corridor users, given the limited life expectancy of the existing bridge. In spring 2015, following a rigorous open, fair and transparent procurement process, the Government of Canada announced that the Signature on the Saint Lawrence Group had been selected for the project, under a public-private partnership.
[Translation]
Signature on the Saint-Lawrence Group's proposal met all the technical criteria required for the project, and offered the best price possible for taxpayers.
[English]
The total cost of the project is $4.2 billion. This amount includes the nearly $4 billion contract between the Government of Canada and the Signature on the Saint Lawrence Group, which covers the construction period from June 2015 to fall 2019, as well as a subsequent 30-year operating period. Most of the funding sought through Supplementary Estimates (C,) approximately $49.3 million, is an increase to the operating expenditures. This would allow flexibility for unforeseen events and unanticipated work that would be the responsibility of Infrastructure Canada related to the project on the bridge.
[Translation]
To ensure timely delivery of the project, this amount must be available on short notice so that minor unforeseen events do not delay the project. This was planned in the project approval, which we received in June 2015.
[English]
The remaining $12.5 million for the new Champlain Bridge corridor project is an increase in capital expenditures. This increase will allow for land acquisition to realign human resources for the design and construction phases and for compensation of various agreements that have or will be signed with third parties to ensure efficient project delivery. This was also planned as part of approvals that were received last summer, in 2015. The New Bridge for the St. Lawrence Corridor Project is intended to ensure continued safety and service for the area, promote economic growth and provide value for money for Canadians. It will also foster sustainable development and urban integration. The department is committed to ensuring that the new bridge will open on time and on budget in December 2018 as intended.
I'll go now to mains. Is that okay?
The Chair: Yes, please.
Ms. Boileau: Infrastructure Canada, through its Main Estimates, is seeking a total of $3.9 billion for investments in public infrastructure. Included in the department's Main Estimates is $2.1 billion through the Gas Tax Fund. There is also $1.6 billion in contribution funding available for provincial and territorial infrastructure projects. Those are voted appropriations.
The remaining amount identified represents operating funding for INFC to administer and deliver these programs, and capital funding for the acquisition of land for the new Champlain Bridge corridor project, as well as the Gordie Howe International Bridge.
The funding in our Main Estimates is used to support infrastructure projects across the country. It is important to note that under most of its programs, Infrastructure Canada's expenditures match the pace at which funding partners build their infrastructure projects and subsequently submit claims for eligible expenses. If recipients do not claim the expenses they forecasted in any given fiscal year, Infrastructure Canada asks Parliament to reprofile program funds through future-year appropriations to meet the cash flow needs of the recipients.
The bottom line is that those funds never lapse. The infrastructure funding is always committed to infrastructure projects.
This method has two major benefits: By flowing cash to recipients after the eligible expenses are submitted and assessed, we are able to ensure accountability for taxpayers' money; and by asking Parliament to reprofile unspent funds from year to year, we ensure that no committed funds are lost.
[Translation]
Funding recipients know that their funds remain available to them even in the event of unforeseen delays such as extreme weather events or construction delays.
[English]
The Gas Tax Fund is a program that flows funds differently. The Gas Tax Fund provides $2 billion in predictable, long-term and stable funding for Canadian municipalities to help them build and revitalize their public infrastructure. The federal Gas Tax Fund is being indexed at 2 per cent per year, to be applied in $100-million increments. This year is the first year the indexation amount is being applied to the program. It's the first time we have $100 million available. It's being redistributed to the provinces through the allocation.
[Translation]
Funding through the Gas Tax Fund is provided up front, twice a year, to provinces and territories, which in turn flow this funding to their municipalities to support local infrastructure priorities. Municipalities can pool, bank and borrow against this funding, providing significant financial flexibility.
[English]
The Gas Tax Fund represents the majority of the statutory funding at $2.071 billion, with smaller amounts for employee benefit plans and the minister's salary and motor car allowance, which are also statutory.
Infrastructure Canada is requesting an overall increase of $236.2 million over last year's Main Estimates. That's the variance from last year to this year. This total includes $50.2 million in increased operating expenditures, related to the design, construction, operation and maintenance of the new bridge for the St. Lawrence; $44 million increased capital expenditures, mainly related to the acquisition of lands for the Gordie Howe International Bridge project; an increase of $98.7 million under the Gas Tax Fund, related to the indexation of the fund; and a net increase of $43 million in contribution funding.
[Translation]
As you may already know, in November 2015, the Prime Minister transferred the responsibility of the Gordie Howe International Bridge to Infrastructure Canada. The Gordie Howe International Bridge is managed by the Windsor- Detroit Bridge Authority, a Crown corporation.
[English]
The Gordie Howe International Bridge addresses future needs to meet the anticipated growth in traffic over the years to come. It will also provide for redundancy at the busiest trade corridor between Canada and the U.S. in case of emergencies or unforeseen events.
The Government of Canada is fully committed to the Gordie Howe International Bridge project, and it is the Windsor-Detroit Bridge Authority's mandate to deliver the new crossing through a public-private partnership. Significant work has already been undertaken, and the procurement process to identify a private-sector partner is currently under way.
[Translation]
I would now like to explain the final item, the net increase in contributions, a bit more fully.
[English]
In its mains, the department is showing an increase of $574.8 million under the New Building Canada Fund, and at the same time a decrease of $531.8 million under our legacy programs, including the original Building Canada plan funds. The decrease is based on the projections for cash flow for approved projects as submitted to us by the recipients; this represents the net increase in contribution funding of $43 million, which I spoke to earlier. That's why we have a plus/minus with regards to our overall contribution funding.
As I explained earlier, we provide funding to recipients after they submit their eligible claims. It is common for there to be variations from year to year with anticipated cost projections from project components, and this is why Infrastructure Canada asks for funding to be reprofiled when necessary.
[Translation]
This level of funding for the New Building Canada Fund reflects the initial funding originally anticipated to flow to recipients in 2016-17 when the program was first established. The difference that you see in the level of funding reflects what was initially anticipated in the fiscal framework when the program was announced. The department sought to reprofile some of this funding to future years, but the request was not approved.
[English]
That's why you see the difference between the two.
Finally, you will have seen there are no requests related to the government's commitment to invest $60 billion in new infrastructure funding over the next 10 years in either our Main Estimates or our Supplementary Estimates (C). Minister Sohi is working with Minister Morneau as he develops the budget, and the related funding will appear in later supplementary estimates. As Minister Sohi and the department work towards finalizing the details of the new infrastructure plan, we will continue to provide support for infrastructure through our existing legacy programs and the remaining funding from the New Building Canada Plan.
Thank you very much for your time. We are here to answer your questions.
Senator Marshall: I don't have a question on the Supplementary Estimates (C), but I do have a couple of questions on the Main Estimates, just to make sure that I understand you correctly. On page 190, the gas tax is the $2.74 billion, isn't it?
Ms. Boileau: Yes.
Senator Marshall: If you look down below, the listing of the 2016-17 transfer payments, is this all gas tax?
Ms. Boileau: I'm sorry?
Senator Marshall: The $2.071 billion, is that a listing of what is in the gas tax?
Ms. Boileau: Are you looking at the expenditures by strategic outcomes and program?
Senator Marshall: The bottom half of the page, the listing of the 2016-17 transfer payments.
Ms. Boileau: The Gas Tax Fund is shown as one line, as a statutory amount.
Senator Marshall: Right.
Ms. Boileau: The listing that you are looking under, the transfer payments, these are different programs. Part of this is our legacy programs and part of this is the New Building Canada Fund. They are voted appropriations. They are different than the gas tax.
Senator Marshall: Okay. I'm not talking about the gas tax now; I'm talking about the voted appropriations.
Ms. Boileau: Okay.
Senator Marshall: Have these been allocated out to various communities or various projects yet? They have been, have they?
Ms. Boileau: For example, if you look at the contributions under the Building Canada Major Infrastructure Component, or the New Building Canada Fund, the allocations are per province. What you are seeing here is the amount that has been committed and that proponents will be coming to us under their claims to be reimbursed.
Senator Marshall: So that information would be on your website, would it, broken down by province?
Ms. Boileau: They are. We have the Gas Tax Fund allocation on our website, as well as the New Building Canada Fund allocations by province, as well as the Small Communities Fund.
Senator Marshall: How about all the other categories under contributions? Would those also be on your website, allocated by province or by community?
Ms. Boileau: The Inuvik to Tuktoyaktuk would be on our website. But it's one. On the Green Infrastructure Fund, which is a legacy fund, I'm not sure that that's on our website allocated by province. It's a merit-based program, so that allocation would not be done by province.
Senator Marshall: But all the other ones would be?
Ms. Boileau: Under the NBCF, yes.
Senator Marshall: All of them would be, so that's where I would go to look for that information?
Ms. Boileau: If you'd like that information, we can provide that to you.
Senator Marshall: I would like to see that, and I think senators would like to see what benefit each province and territory is getting. Yes, I would like to see that.
The Chair: I guess there must be a lot of anxiety in your department now about what is coming at you in terms of the new budget. Do you have any sneak previews? What are you doing to prepare yourselves for the new approach to infrastructure spending?
Ms. Boileau: I don't think anxiety would be the right word. There is a lot of excitement with regard to what is coming forward. As you know, a lot of details are being worked out, so a lot of work is ongoing. We're looking at different ways to be able to deliver the new programming in consultation with partners; so there are many ongoing conversations.
The Chair: Is there anything you can share with us about that process? If I understand correctly, you're saying that you're preparing the process, which will be laid out for how new projects would be applied for and new partners in terms of PPPs. Are you preparing the framework for the rules for how people or provinces or municipalities or anyone with infrastructure projects will have to apply? Is that pre-work being done now so that you'll plug in the numbers when they come in and you'll be able to move forward expeditiously?
Ms. Boileau: There are two areas we can talk about. The existing programming, the New Building Canada Fund, is still in place and will still be available. The Gas Tax Fund is still in place and will still be available from the municipalities. We are looking at ways of streamlining internally the New Building Canada Fund. There are processes we can do a little differently to speed up the process and review the approvals. The new funding is still being worked out. Until those details come to light, it's very difficult for me to speak to how it will be rolled out.
Senator Campbell: At one time the GST was rolled back to the municipalities. Is that covered under your budget?
Ms. Boileau: That's a good question. I'm not quite sure.
Senator Campbell: When the government brought in the gas tax rebate, they also rebated the GST to the municipalities.
Ms. Boileau: We deal with the Gas Tax Fund solely, so I'm not sure about the other. I'm sorry.
Senator Mockler: I'm at page 190 of the Main Estimates for 2016-17, under Infrastructure Investments in Small Communities and Rural Areas. In 2015-16 you had $171.3 million, which has been downsized to $131.9 million. Could you explain such a change?
Ms. Boileau: We haven't downsized. What you see in the Main Estimates at the top part is how we report by program activity architecture. Infrastructure Investments in Small Communities and Rural Areas includes the Small Communities Fund. That was an allocation in the fiscal framework in 2015-16 established when the program was set out. That amount had other programs attached to it. What you see in the Main Estimates for 2016-17 represents the forecasts of what we know from proponents indicating to us that they will be coming for payment this year based on the projects that have been committed. There is a difference, but that amount may increase over the year as proponents come in with projects completed and claims submitted. It will probably grow during the year through our Supplementary Estimates (A, (B) and (C).
Senator Mockler: There is a difference. When you look at that difference, would you tell the committee which regions of Canada are most affected by this?
Ms. Boileau: We can probably provide you with a description around why there is the difference and show which projects are progressing and which projects will progress to a level where you may not see the difference in your Supplementary Estimates (C) at the end of the year. Right? Our estimates are based on the budget cycle and what was attributed in the fiscal framework. At the beginning of the year, we have a certain amount allocated to us. We may not have used all of that money as part of the Main Estimates in 2015-16, so we ask to reprofile it to another year. We can come back and give you a little more information on that.
Senator Mockler: If I use the word "carryover,'' is that what we're looking at?
Ms. Boileau: Yes, a reprofiling, exactly.
Senator Mockler: Next is Contributions under the Building Canada Fund. For 2015-16, it was $909 million, and it has been reduced to $603 million for 2016-17. Could you please explain that difference?
Ms. Boileau: Contributions under the Building Canada Fund: My assumption is that you're looking at the Major Infrastructure Component on the first line.
Senator Mockler: Yes.
Ms. Boileau: What you see is a difference of $300 million, in part basically because some of these programs are sunsetting. Many of the projects are being paid out, coming to completion. You see a difference in the funding that is being requested. We had a large number of projects being completed last year, and a large number of claims coming in.
Senator Mockler: Those questions could be asked in another forum, I would say, when the budget comes in. I'm just thinking of funny ways of doing things.
The Chair: That's the first partisan shot to come out today. That's pretty good.
Senator Mockler: Please, I'm not putting this to officials — absolutely not.
Ms. Boileau: I think it's a fair question. Some of these programs have been around since 2002 and are coming to the end or their completion. Projects that have carried over many years are also coming to the end of their completion; so you are seeing the amounts that were attributed overall.
In this program specifically, close to 90 per cent of the funds available under the program have been committed or dispersed.
Senator Mockler: You could provide us with the five regions.
Ms. Boileau: For sure. It may simply be that the program is coming to its end.
Senator Mockler: That's right.
The Chair: If I understand correctly, an envelope of money will be created by the government. Existing programs are still in place, so decisions will be made whether they will be sunsetted out with new names. A structure will be set up with a new envelope of money. The Gas Tax Fund is a vehicle that still works, so it will probably be some form of reformatting the vehicles and the amounts to make sure that people understand the actual method of trying to access them. Is that correct?
Ms. Boileau: I think there are two things. If we talk about legacy programs, like this one, some of them date from 2002. There is information on our website, currently, that is distributed by province and indicates how much money is remaining in those existing programs, for each province that has not tapped into that money. Therefore, they are encouraged to come in and provide projects and submit business cases for those funds.
When you talk about the New Building Canada Fund, $14 billion was allocated when the programs were created. There is potentially only $1 billion that has been committed since 2013-14. Therefore, a large amount is available for provinces, territories, and municipalities that apply for those existing funds. Those programs are still in place.
With regard to the new funding, those details are still being developed as we speak.
The Chair: If there's money still in the funds that hasn't been spent, where is that money? Is that your question, senator? Am I close?
Senator Mockler: You're on.
The Chair: Has that money — it's been reprofiled or carried forward, but is it somewhere?
Ms. Boileau: That money is still in the fiscal framework and is still dedicated to infrastructure funds.
The Chair: If it's still available, does that mean that if you had, say, $10 billion that hadn't been spent, and somebody wanted that money, would it become something that goes into a deficit position, or would that come out of some cash account someplace? I'm just trying to understand: Where is the money? Is it just a book entry, and we're going to have to borrow to get the money back?
Ms. Boileau: It's in prior years. The money is already sitting in the fiscal framework, because they were programs that were initiated in 2002, 2007 and 2009. That money has remained in the fiscal framework for infrastructure projects. The money is still there.
The Chair: When it all washes out, it will be interesting to see where that money exits from to go back into the projects.
Senator Marshall: Where it ended up.
The Chair: Yes. I guess the question is, from a priority perspective, what type of relationship will you folks have with the provinces? Each province will get "X'' amount of dollars, but who makes the decision on priorities? I heard some of the mayors saying, "Forget about the provinces. Just give us the money, and we'll figure out where to spend it.'' To me, a simple individual, it would seem that prioritizing the importance of these projects will be critical to the success. How does it work right now?
Ms. Boileau: Currently, we receive priority items from our partners at the provincial, territorial or municipal levels. The municipalities must prioritize to the province, and the province prioritizes to us with regard to the investments they would like to make under the New Building Canada Fund.
The Chair: Is there someone who would verify that? Who makes the final decisions on the priorities? Is it the provinces or is it you folks, because the federal government is laying out a huge amount of money? I'm just wondering, from an execution perspective, how we can determine where the best return on money is going to be.
Ms. Boileau: There is a combination. When we're talking about an allocation by province and territory, we work in partnership with the provinces and territories. When we're looking at what is considered a national investment fund — the $4 billion — those decisions are merit-based. They have to be considered national in scope, and they have to have a certain business case attached. There is a level of review that is still considered. We've had a number of those that have come through. We can take the Port of Montreal as an example: That was considered a nationally significant program, and it is approved by Treasury Board ministers.
Senator Marshall: Is any of it on a per capita basis? I understand the process of how it rolls up from the municipalities, goes to the province, and then to the feds. Some items are on a per capita basis, aren't they?
Ms. Boileau: Yes.
Senator Marshall: Whereas others were on the merit principle?
Ms. Boileau: The merit principle. All of those that are allocated by province are per capita.
Senator Marshall: Right. I would expect that if some provinces — especially the smaller ones — felt that they weren't getting their fair share, whatever that's defined as, there would be issues in those programs. How do you make sure that there is at least some equitable distribution among provinces and territories? The big provinces don't get all the money; the smaller provinces do access the funding. How is that balance carried out?
Ms. Boileau: The balance is carried out per capita when we're looking at allocations. You have an allocation under our Provincial-Territorial Infrastructure Component Small Communities Fund. Projects have to be in communities that have 100,000 people or less, so you are targeting the smaller areas with regards to this. The Gas Tax Fund is also per capita, so the balancing happens when you look at the overall total amounts.
Senator Marshall: Not just one program, but all of the programs.
Senator Neufeld: Is the amount of money allocated ever oversubscribed? I assume it is.
Ms. Boileau: Oversubscribed? I'd like to say yes, but that has not been the case.
Senator Neufeld: That has never been the case?
Ms. Boileau: From what I can see, we have not overcommitted any of the programs. If anything, we have not had enough projects.
Senator Marshall: But if you overcommit, would that be a contravention of the Financial Administration Act?
Ms. Boileau: We would not.
Senator Neufeld: What I'm getting at is they wouldn't, because then a decision has to be made. Who do you call? That's where it would come, and that would be the Treasury Board of Canada Secretariat and the ministry together making those decisions, but I understand it's never been oversubscribed. That means the provinces and the municipalities don't always have all the money to be able to partner with the federal largesse.
The Chair: That addresses the point you brought up about monies that haven't been spent. It's because either the municipal or the provincial governments didn't have the money to put in their share. Is that correct? Is that why these programs didn't take place or weren't implemented?
Ms. Boileau: No. What we've seen in some instances is that priorities that were identified by the province for certain projects, when it came time to come through with the information to submit, may have been overtaken by other events or by other priorities. In other instances, because of information around their capital plans or asset management, they've decided to fund certain areas versus others. And sometimes it's because of how they decide which program they will bring in for the financing. It is very much at the discretion of the proponents on how they want to apply for the funding.
The Chair: If we look back 10 years, would we know how much money has not been spent on infrastructure?
Ms. Boileau: Yes.
The Chair: That would be an interesting number to understand.
Senator Neufeld: It's exactly what I said. The provinces and municipalities didn't have the cash to be able to pony up. You can make the pitch that you need it, but if you don't have the cash at the end of the day, the feds aren't going to be there, and that's understandable. That's why it's underfunded. She said the same thing that I was saying; that's actually how it works. There are other things that come. As was said, with a province, they may have had something else come on the horizon, all of a sudden, that they had to look after, so something becomes less of a priority and it's not applied for.
It's contingent on the other partners having their third each in most cases.
The Chair: Last little question, Senator Mockler, before we go. Thanks to the ladies for being nice and patient.
Senator Mockler: Thank you, chair, and officials. I'd like more information on your contributions under the Border Infrastructure Fund that's been reduced from $21.8 million to $1.8 million.
Ms. Boileau: It is basically because this program, which started in 2002, was a $600,000 program; $592,000 has been committed. Therefore, it is coming to its end.
Senator Mockler: So the program basically is winding down?
Ms. Boileau: Yes.
Senator Mockler: Then we're looking at an additional program that's coming in under the New Building Canada Fund Provincial-Territorial Infrastructure Component program that goes from $12 million to $57 million? That's good. New government, new program.
The Chair: I think we've exhausted ourselves. Ladies and gentlemen, colleagues, we thank Ms. Pham and Ms. Boileau for coming in and initiating a discussion with us. We'll be excited to see you back when the new policy comes out.
I would ask that Senator Mockler and Senator Campbell stick around for five minutes. We'll have a steering committee meeting.
I thank you folks for coming in and speaking with us.
(The committee adjourned.)