Proceedings of the Standing Senate Committee on
National Finance
Issue No. 27 - Evidence - March 8, 2017
OTTAWA, Wednesday, March 8, 2017
The Standing Senate Committee on National Finance met this day at 1:47 p.m. to examine the Main Estimates for the fiscal year ending March 31, 2018.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Good afternoon. Welcome to the Standing Senate Committee on National Finance. Colleagues and members of the viewing public, the mandate of this committee is to examine matters relating to federal estimates generally, as well as government finance.
My name is Larry Smith, a senator from Quebec, and I chair the committee. Let me introduce briefly the other members of our committee.
[Translation]
To my left, Senator Éric Forest, from Quebec, and to his left, Senator André Pratte, also from Quebec.
[English]
From the beautiful province of Alberta, we have our two colleagues, Senator Betty Unger and Senator Doug Black. Senators, welcome.
On my right, from the Rock — and she's all by herself but she's as strong as a rock — former auditor general, Senator Beth Marshall. Senator, welcome.
[Translation]
Today, we will continue our examination of the Main Estimates for the year ending March 31, 2018.
[English]
To give us an overview of their funding requests in the Main Estimates 2017-18, we have three departments appearing this afternoon.
During the first session, we have officials from Employment and Social Development Canada. Having changed his title, because he was so excited that every time he came in here we read his title in a much longer version, Mark Perlman, Chief Financial Officer. Welcome, and Jason Won, Director General, Financial Management and Advisory Services and Deputy Chief Financial Officer. Jason said. "If Mark wants his cut, I want mine added.'' Welcome, and Paul Thompson, Senior Director, Skills and Employment Branch, welcome.
Thank you for being here. Mr. Perlman, the floor is yours.
Mark Perlman, Chief Financial Officer, Chief Financial Officer Branch, Employment and Social Development Canada (ESDC): Thank you, Mr. Chair, and members of the committee. I just didn't want to wind down the clock with our long titles. I thought that was the best way to go.
I am pleased to appear before you in my capacity as Chief Financial Officer for Employment and Social Development Canada, ESDC.
[Translation]
Senior executives from key areas of ESDC are also in attendance and may be coming forward to help me answer some of your questions.
The department delivers a range of programs and services that affect Canadians throughout their lives. The department provides seniors with basic income security, supports unemployed workers and helps students finance their post-secondary education. We also have the mandate to maintain a strong, productive, healthy and competitive workplace within the federal jurisdiction through the Labour program. Service Canada delivers ESDC's programs to citizens, as well as other Government of Canada programs and services.
[English]
Allow me to present to the committee an overview of ESDC's portion of the 2017-18 Main Estimates tabled on February 23, 2017.
The 2017-18 Main Estimates for ESDC amount to $57.4 billion, a decrease of $4.2 billion when compared to the 2016-17 Main Estimates. Of this, $55 billion or 96 per cent will directly benefit Canadians through the Old Age Security, OAS, program and other statutory transfer payment programs.
In these estimates the department is showing a decrease in statutory payments. This is the result of the forecasted decrease of $7.7 billion to the Universal Child Care Benefit, UCCB, based on the Budget 2016 announcement introducing the Canada Child Benefit starting on July 1, 2016, which is now administered through the Canada Revenue Agency.
You will note that the forecasted spending of the OAS program increases year after year, resulting from the aging population and the planned increase in the average monthly benefit amount, which offsets part of the UCCB decrease.
Other statutory programs such as the Canada Disability Savings Grants and Bonds and the Canada Student Loans and Grants have also increased by $107 million and $461.4 million respectively.
Canada Disability Savings Grants and Bonds increased due to a steady increase in total registered plans and participation in the program. Canada Student Loans and Grants are increasing mainly because Budget 2016 increased Canada Student Grants for low- and middle-income students by 50 per cent and expanded the existing eligibility thresholds for these grants.
It should be noted that the statutory items are included in the estimates for information purposes only, as Parliament has already approved the purpose of the expenditures and the terms and conditions under which they may be made through other legislation.
In addition to statutory items, under vote 1, operating expenditures, the department plans to spend $576.8 million in 2017-18, a decrease of $31.2 million from the 2016-17 Main Estimates of $608 million.
The net decrease of $31.2 million is primarily due to sunsetting resources provided to administer the reforms to the Temporary Foreign Worker Program. The government is currently reviewing the resource requirements for this program.
As for vote 5, grants and contributions, in the 2017-18 Main Estimates the level is $1.8 billion, an increase of $154.1 million from the 2016-17 Main Estimates.
[Translation]
Through grants and contributions, the department provides funding to other administrations and organizations in the volunteer sector and the private sector in order to support projects which meet the needs of Canadians in the workforce and in social development.
[English]
The increase of $154.1 million is mainly attributable to investments announced in Budget 2016 for the Canada Summer Jobs under the Summer Work Experience stream of the Youth Employment Strategy in order to expand employment opportunities for young Canadians.
It is also due to increased funding for the Homelessness Partnering Strategy announced in Budget 2016 to enhance community efforts to tackle homelessness and support innovative approaches to preventing and reducing homelessness.
In addition, funding for the Skills and Partnership Fund was renewed in order to support indigenous organizations in partnership with employers to provide training for First Nations, Inuit and Metis people to fill specific job vacancies in high-demand industries.
These Main Estimates also include funding announced in Budget 2016 to better prepare students for the world of work through support for new work- integrated learning opportunities including co-op placements for young Canadians in post-secondary institutions, with a focus on high-demand fields such as science, technology, engineering, mathematics and business. The Student Work -Integrated Learning Program will complement existing programming directed at helping young Canadians to improve their labour market prospects.
In addition, increased funding is included in these Main Estimates for the Aboriginal Skills and Employment Training Strategy to launch a pilot labour market information survey on reserve in order to improve available labour market information in First Nations communities and to support projects that enhance training to align with community needs in areas such as housing construction, water treatment, child care and local administration.
You will note that Employment Insurance, EI, benefits and Canada Pension Plan, CPP, benefits are excluded from the department's Main Estimates. The EI operating account and the CPP account are two specified purpose accounts. The EI operating account is included in the consolidated data of the Government of Canada. The CPP is not incorporated into the government's financial statements since it is under joint control of the federal government and the participating provinces and territories. EI and CPP benefits are reflected in the departmental plan, formerly the Report on Plans and Priorities, which is usually scheduled to be tabled in March of each year.
[Translation]
I hope this overview has given you a better understanding of the Main Estimates for our department.
[English]
My colleagues and I would be pleased to answer your questions.
The Chair: Thank you, Mr. Perlman.
Senator Marshall: I have two preliminary questions before I get into my main question on clarification of the student loans. Are they in the non-budgetary, non-statutory?
Mr. Perlman: Yes.
Senator Marshall: The student grants are in total statutory, are they, in that $57 billion?
Mr. Perlman: Yes, they're in the statutory.
Senator Marshall: Where would the Disability Savings Grants and the Disability Savings Bonds be?
Mr. Perlman: They would be under statutory as well.
Senator Marshall: Would they be statutory budgetary or statutory non-budgetary?
Jason Won, Director General, Financial Management and Advisory Services and Deputy Chief Financial Officer, Chief Financial Officer Branch, Employment and Social Development Canada (ESDC): Budgetary.
Senator Marshall: Both of them would be budgetary.
Mr. Won: Yes.
Senator Marshall: I have some questions on grants and contributions. In a report that was issued by the Parliamentary Budget Officer last month, he indicated that grants and contributions were up. I think he said it was10 per cent.
Can you give us an overview for both areas, both grants and contributions? Are they application based, first? How do you decide who is getting the funding under grants?
Mr. Perlman: I think there's a mixture, depending on the program that's there. I don't know if Paul wants to speak to it too.
Paul Thompson, Senior Assistant Deputy Minister, Skills and Employment Branch, Employment and Social Development Canada: I could speak to a couple of examples. One of the main branches of expenditures would be apprenticeship grants, which is done on an application basis. It is quasi-statutory in nature. Depending on the volume that applies, if they're eligible they would receive the grant. It's done on an application basis, as I said.
The majority of the contribution programs are done on a call-for-proposals basis. We'll periodically issue a call review proposal and arrive at a decision on which projects are funded.
Senator Marshall: For the application-based apprenticeship grants, would that be first come, first served, or do you say everybody has to have their application in by June 30 and then you decide?
Mr. Thompson: We do continuous intake of the grants. Basically the envelope is an estimate of what will be required for the year. We do not turn down any applicants. It's simply a budget envelope set aside based on estimated volume.
Senator Marshall: Some are application based and others are requests for proposal. What would be an example of a request for proposal?
Mr. Thompson: There are a number on the list. The Youth Employment Strategy runs on a request-for-proposal basis, for example, in a couple of its components. The Skills Link stream of youth programming for vulnerable youth, literacy and essential skills programming runs on a call for proposals.
Senator Marshall: Is literacy an RFP?
Mr. Thompson: Those are a couple of examples.
Senator Marshall: One of them says, "Contribution to not-for-profits,'' and it's for homelessness. It says it is to support activities to help alleviate and prevent homelessness and to carry out research. Some of them have more than one objective.
How would you decide, for example in that one, how much would go for research and how much would go to alleviate and prevent all homelessness? How do you decide how much you will spend on studying and how much you will spend on actually trying to resolve problems?
Kathryn McDade, Senior Assistant Deputy Minister, Income Security and Social Development, Employment and Social Development Canada: The examples that Paul was giving were around the labour market side of the department, but the question you've asked, senator, is about the Homelessness Partnering Strategy. That one is administered in a different way than the examples that Paul gave in that there are dedicated funding streams that are predetermined.
Specifically to your question on how much is going to be devoted to research versus an investment in a community- based organization, that is determined at the beginning of the fiscal year and then the funds are administered accordingly. On research and development, what we call nationally delivered homelessness investments we issued a call for proposals back in the fall. The applications exceeded the available funding. We conducted an assessment process and we're just in the process now of finalizing those grants and contributions.
Senator Marshall: Were you issued an RFP? Is that for the research or is that for the actual program delivery?
Ms. McDade: That was for what we call innovative solutions to homelessness, so it is research and development based. The actual investments in communities to support community-based programming for homelessness are administered to 61 designated communities across the country that have been identified as having homelessness challenges. We have contribution agreements with them on an ongoing basis and we disburse funding.
Senator Marshall: Is that every year to them?
Ms. McDade: That's right.
Senator Marshall: For that example, for 2016-17 there's $111 million. What would be the percentage split out for the studying and how much would be for actual program delivery? I would like to have an estimate.
Ms. McDade: If you give me a second, I can give you the precise numbers. I can tell you that roughly 80 per cent of the funding is distributed to communities.
Senator Marshall: It is to deal with the actual problem.
Ms. McDade: That's right; the lion's share. In 2016-17, just over $100 million is distributed directly to designated communities.
In the current fiscal year, and again in 2017-18, the government made the decision to increase the allocation for what you referred to as research, innovative solutions to homelessness. That allocation in 2016-17 is just over $9 million.
Senator Marshall: For 2017-18, what do you anticipate the split to be?
Ms. McDade: The same as it was in 2016-17, so over 80 per cent invested directly in designated communities. For 2017-18 that you're specifically interested in, it's about $6 million forecast to be invested in research and development. There is a small amount of money that I haven't referenced that is invested in rural and remote communities which are not designated but apply for funding, and a small stream invested in Aboriginal communities serving the off-reserve Aboriginal population.
Senator Marshall: What's the accountability regime that you have in place? There is quite a variety of grants and contributions. We looked at just one, the one on homelessness. You were saying it's the same people getting money every year. What kind of accountability regime do you have in place to make sure that these organizations are actually delivering what you want them to deliver? How do you do that?
Ms. McDade: It's different for different programs. I'll speak to the example of homelessness, since that's the one that we were talking about.
We have a very sophisticated reporting regime in place on the Homelessness Partnering Strategy. Each community is required to report on a quarterly basis on their investments. We have a software system that shelters can input to directly.
In addition to reporting, let's say from metropolitan Toronto, shelters within each community provide data to us almost on a real-time basis in terms of shelter usage and the demographic characteristics of people in the shelter system. It's all anonymized, obviously, but it does give us a portrait of how the money is being spent.
Senator Marshall: And it focuses on results, does it?
Ms. McDade: Yes, we have specific result indicators.
Senator Marshall: There's a new policy on results that has to be implemented, I think, by November 2017. Will what you have in place now change or will it meet the requirements of the new policy?
Ms. McDade: Half and half. For many of the indicators that we've been reporting over time we will continue to report on, but as part of the new results and delivery strategy the government has asked us to develop new indicators.
My expectation is that for reporting on the 2016-17 fiscal year, which isn't yet completed, we will introduce some new global indicators that will allow us to get a portrait of how communities across the country are doing. The idea is to track those over time, establish a benchmark in 2016-17, and then continue to report.
Senator Marshall: Then you will be fully converted over by the end of this year.
Senator Black: I want to thank you for the work that you do. Your department is an extremely important department to Canadians, because I daresay there are no Canadians untouched by the work that you and your colleagues do.
I have a couple of questions. I don't know whether you can answer them, but I'm going to ask them and see where we go.
I'm interested in whether or not you have done any costing analysis on two potential programs. They're not existing programs; they are potential programs. If there were to be a guaranteed annual income for Canadians below a certain income level, have you or your department officials done any thinking on what a cost number for that would be?
My second question is similar. If the Government of Canada, in conjunction with the provinces, were to determine that it was in Canada's interest to pay for a student's first degree by way of public education in the same way grades 1 to 12 are paid for publicly now, do you have any idea of the cost of such a move?
Mr. Perlman: Let's start with your first question.
Doug Murphy, Director General, Social Policy, Employment and Social Development Canada: To the senator's question about a guaranteed annual income and whether we have costed that, I would say we have not costed that within the last decade or so.
Senator Black: Things have changed.
Mr. Murphy: Things have changed. It's a perennial idea that comes up, but in the more recent iteration of the discussion about basic income, guaranteed annual income, no, we have not costed those proposals.
Senator Black: And what about the possibility of first university degree or first designation at a college? Have you costed what that would cost if the Government of Canada were to underwrite that for young Canadians?
Mr. Murphy: That is not something that we have costed. I don't know if it has been done elsewhere in the department but for that type of program, not yet.
[Translation]
Senator Forest: Thank you very much for your presentation. My first question pertains to loans and grants. Last week we saw that a large amount would be written on and not repaid. This amount has increased by $451.5 million, and there is a 50 per cent increase in grants as compared to loans. Has the separate amount allocated for loans been reduced?
This is for low-income families, which is entirely commendable. How can we ensure that this large amount actually reaches the intended clients, that is, low-income families?
That is my first question. I have a second one pertaining to Old Age Security.
[English]
Mr. Won: If I understood the question, it relates to the loans that are being allocated for Canada Student Loans. They are going down because the grants that are being provided are increasing.
The Chair: Mr. Perlman, do you have something you want to add to that to clarify?
Mr. Perlman: The increase this year was the education grants and that's why the number of loans is going down. It was a new program that was announced in the last budget to target lower income families to allow greater access to education.
[Translation]
The Chair: Does that answer your question?
Senator Forest: No.
[English]
Senator Pratte: The other part of the question was how you can ensure or guarantee that the grants reach the group that you really want to reach, which is lower income students or families.
Mr. Won: The grants are based on income levels. They will be income tested. Alexis can give you more.
Alexis Conrad, Assistant Deputy Minister of the Learning Branch, Employment and Social Development Canada (ESDC): I manage the student loan program.
Effectively we work in partnership with the provinces. When students come in we look at their needs assessment, which includes their tuition cost and a bunch of other costs. We ensure how much they are entitled to and their costs. Then we divide up the costs. The federal government covers 60 per cent and the province covers 40 per cent. We give them the grants first. In that way we ensure the students get the non-refundable part of the program first and the difference is made up by the loan.
The other part of the question is how we ensure that we're getting to the right people. We do a lot of outreach. We work with universities and other post-secondary institutions to ensure that we are highlighting the available benefits.
The provincial governments do a lot of outreach and a lot of marketing as well to ensure that students finish high school and don't avoid going to post-secondary because they don't think they can afford it. We do a lot of outreach and work with other organizations to spread the word that this funding is available.
We reach about 1.5 million students per year in the low- and middle-income categories. The goal is to ensure everyone knows it's there and the financial support is there. We limit the amount of loans relative to the amount of grants.
[Translation]
The Chair: Does that answer your question now?
Senator Forest: In part. If I understand correctly, it is up to the provinces to analyze the applications. The family's income and the student's income are factors in the decision to provide funding to less fortunate families or individuals.
[English]
Mr. Conrad: Yes, senator. There are two types of students. There are ones that are attached to their families. In that case we look at the family income. There are a large percentage of students who are independent of their families. In that case we'll look at their personal income. We make sure if they are not part of a family that they actually have the financial support they need from us.
Senator Marshall: I just want to follow up. You raised an interesting point. Is there a certain age that you have to be when you just look at the student's income? You're saying that you look at the family income but then in certain cases you just look at the individual's income. Is it after age 18?
What criteria do you have to meet before you can stand on your own, make the application and don't have to provide your family income?
Mr. Conrad: It's not an age-specific thing, senator. It's more how long the person has been out of the family home for and how their life is constructed. When the application comes into the province, they will look at it and ask if the person is actually under the wings of their family or not, and make that decision there. If the student disagrees with the assessment, there's a process they can go through to argue the case.
Senator Marshall: What criteria would you use to determine that?
Mr. Conrad: Some part of it will be how long they have actually been out of the house for, if they have had a measure of financial independence. For example, a lot of students don't necessarily go straight from high school into post-secondary; their journey kind of goes a different direction.
They may take time out and work. If they have spent time in the workforce independent of their family, they would be in that sense independent. There are a number of those variables we will look at on a case-by-case basis to determine whether or not the student is independent. To be honest, most students are quite comfortable with the decisions made.
Senator Marshall: Is it something that's judgmental or is it something that you have to meet certain criteria in order to be considered independent? Do you have to be 21 years of age and have this or do that, or is it something that is greyer than that?
Mr. Conrad: No, it's quite black and white to be honest, senator. I don't have the list in front of me, but it's quite well spelled out so students will know when they are applying if they are independent or dependent students, including how long they have been out of the house for and those kind of things.
As I said, I don't have the exact list here but it's not left to judgment. It's left clearly to the student so they understand where they will fit in and the outcome is the same as they would expect when they apply.
Senator Marshall: Of the program is geared to low-income families or low-income students, the only concern I would have is that they are actually bona fide. You don't have individuals who are being supported by their parents, for example. They are also applying and getting funding under this program.
Mr. Conrad: Indeed we look at tax information to verify what their income is and what their family income is. Over a lot of years it has been very carefully managed to avoid the situation where someone can get loans and grants when they don't need it.
Senator Marshall: Do you have the criteria? Is there something that you could provide the criteria to us? Is there a document?
Mr. Conrad: I'm sure we can get back to you with that.
Senator Marshall: I'd like to see that.
The Chair: You'll get back to our clerk on that.
On your first page it says that the department provides seniors with basic income security. Are you monitoring numbers to determine the effects of the aging population and in which parts of the country? Then you're more sensitive to being able to manage I guess the onslaught of the aging population.
Aside from that, there is the whole issue of people who need income support like the OAS. They are people probably at the lower edge or the lower position on the food chart with income.
Could you give us a little feedback on that?
Mr. Perlman: I'll start off with the number of beneficiaries. Our population is aging. That is why you're seeing a steady increase in the payments.
The Chair: Of course. Are you charting that formally to see percentage increases?
Mr. Perlman: We are seeing the increases, and it's a statutory amount which we then adjust. If the actual payments go higher than expected, we then come back for more statutory funding.
Right now, the estimated number of beneficiaries increased from 5.8 million to 6 million, which is why you're seeing a bit of a difference, plus the forecasted average monthly rate went up from $550 to $561. That's overall in the country. Perhaps my colleague Cliff Groen can speak regionally.
Cliff Groen, Assistant Deputy Minister, Benefits Delivery Services, Transformation and Integrated Services Management Branch, Employment and Social Development Canada (ESDC): I'm responsible for the issuing of EI, OAS and CPP payments.
Yes, that is something that we track on a constant basis. Over the last 10 years we have seen a 33 per cent growth in the number of beneficiaries. We are projecting in the next 10 years, through until 2026, a further 40 per cent growth. That is something that we very closely monitor in terms of overall costs as well as workload requirements.
Senator Pratte: I have a question on the other end of the age spectrum. I'm interested in the Canada Summer Jobs program.
In Budget 2016, there was quite a significant increase in the budget of that program. I think the goal was to create 35,000 additional summer jobs. I was wondering whether there was a review of the program under that increased budget, not only in terms of whether the number of summer jobs created was attained but also as to the types of jobs. The goal of the program, I suppose, is not only just to create jobs but maybe create significant jobs for those young people.
Mr. Thompson: I can answer that. Thank you, senator, for the question. This has indeed been a pretty significant expansion year for Canada Summer Jobs. You mentioned the commitment for increasing the number of jobs.
We had a target of doubling the number of summer jobs for the past summer. We came close but we didn't quite hit the target of doubling. We ended up creating 65,800, so that was a couple of thousand jobs short of a full doubling.
We were in fact financed and we made offers to employers to create the number of jobs to meet that target. We fell a bit short in the execution in that employers weren't able to meet the exact targets that they had set out in the agreements. In part that was owing to the compressed time frames we had this year. We're confident that we will have a more orderly approach this summer and be in a better position to meet that full target. As I say, we came quite close to the target of doubling the number of jobs.
Senator Pratte: Have you reviewed it all, or do you have in your indicators the types of jobs and so on?
Mr. Thompson: We do. In fact we have a target that lays out the types of jobs that we're striving for. We strive for about 75 per cent of the jobs to be in the not-for-profit sector, with the remaining 25 per cent split more or less evenly between public sector and small businesses, with small being less than 50 employees. Those are the types of jobs that we target.
A lot of them are in the not-for-profit, community-based projects which have a double bottom line, if you will, of work experience for the individuals but some valuable community service being done at the same time, which is part of the goal of the program.
Senator Pratte: What happens if during the summer you see that the criteria, this 75 per cent, for instance, in the non-profit sector, are not attainable? Do you absolutely want to reach those or are you flexible? Would you accept 65 per cent in the non-profit sector if you want to reach your 70,000 summer jobs?
Mr. Thompson: This is a program that's generally oversubscribed, so we're able to choose the projects with a view to meeting those targets in each of those areas. The employers ideally make a hard commitment to employing a given student for a given length of time based on the wage subsidy that we are providing.
Senator Pratte: This is my final question: What was this goal of doubling the number of summer jobs based on? Was that a target that had been previously reached before and then there had been a cutback? What was it?
Mr. Thompson: There were approximately 34,500 jobs achieved the previous year. It was the government's decision to double it in light of the persistent and high unemployment rates for students. The objective was to make some progress on that important policy issue.
The Chair: If I could ask one more question, on page 7 it says that in addition, increased funding is included in these Main Estimates for Aboriginal Skills and Employment Training Strategy to launch a pilot labour market information survey on reserves in order to improve available labour market information. This is to support projects that enhance training to align with community needs in areas such as housing construction, water treatment, child care and local administration.
How much money do we have assigned to that interest, if you like, or that program?
Mr. Won: There are two components. The labour market survey is just under $2 million, at about $1.8 million. Then, for the piece related to the enhanced training to align to community needs, an incremental $10 million was provided as part of this. We saw the $5 million part of Supplementary Estimates (C) last week. That was the same piece. There was $5 million for 2016-17 and $10 million for 2017-18.
The Chair: This is obviously a two-year type program. Is that correct?
Mr. Won: It's two-year funding, essentially. I guess Paul can give you more detail, but the Aboriginal Skills and Employment Training Strategy has been ongoing for some number of years. This was some interim funding and I think we are currently working on a renewal.
The Chair: If we spent 10 years doing this, as you mentioned, how much money have we spent and what are the results we have achieved?
The reason I ask the question is because housing construction is a major issue. We have 640 nations, from what I understand. In certain places we have fantastic quality construction while in other places it is, as Donald Trump would say, a disaster, but I am not Donald Trump.
Water treatment is an issue with a number of contaminations and problems existing with child care local administration. Obviously child care is another issue where there's sensitivity.
How much have we spent over 10 years, and what do we have in results for the money that we spent? Do you have measurements that you use?
Mr. Thompson: We do indeed. This was a rather modest incremental investment on a pretty large program. The Aboriginal Skills and Employment Training Strategy spends approximately $300 million per year. It is a service delivery network across the country that has a rigorous performance measurement framework around it in terms of results.
For 2015-16, about 19,500 individuals obtained employment as a result of intervention from this service delivery network.
The Chair: Did they obtain employment on reserve?
Mr. Thompson: The employment could be on or off reserve. These service providers are both on-reserve providers, as well as urban agreement holders. They are for indigenous clients. We don't track it separately on or off reserve.
The Chair: For the last 12-month period 19,000 jobs were acquired. Were they full-time jobs or part-time jobs?
Mr. Thompson: That would be full-time employment obtained. I believe we measure it 12 months after the intervention has completed.
The Chair: What type of training would they actually get?
Mr. Thompson: It would be a range of training opportunities that could include very in-depth training for a trade, for example, including supporting someone to achieve their apprenticeship. That would be a pretty elaborate and major investment in an individual.
It could be something like that or something more minor such as some essential skills upgrading to obtain employment.
The Chair: What is the average number of jobs that have been created per year over the last 10 years? Is there a rolling average? Has it gone up? Has it gone down? Is it static?
Mr. Thompson: We've had a target of about 14,000 to 16,000 jobs per year. Last year we exceeded that target. Over the number of years the program has been creating more jobs on a fairly constant budget, so the performance has been increasing, if you will.
That's not to say that there's not a huge need out there still. As senators know, there is a pretty significant employment gap for indigenous people, and we have a long way to go on that front.
The Chair: Have you been able to measure the results in terms of performance where you have the best results from the training monies that have been spent in terms of number of new water treatment facilities or number of houses built? Is there some way that you can measure, besides saying the number of people who have been through the training? What has it delivered? Has it delivered better house construction? Has it delivered better water treatment? Has it delivered better child care so there can be a link between the monies spent? We know that $300 million is a lot of money, so what's the result? Is it just the number of 14,000 to 18,000 a year?
Is that the measurement you want to use, or is the measurement a combination of numbers tied to actual results of projects and showing something concrete that this is what was delivered?
Mr. Thompson: We measure the employment which I mentioned. We also measure returns to school, which is also a good thing. An individual, who wasn't in education, training or employment, who gets into school is another positive outcome that we track.
I should note this incremental $5 million was targeted specifically for projects that can align training with some specific opportunities that are emerging as a result of other investments such as a training initiative that could train indigenous people in housing construction and those types of projects to leverage the skills side from other infrastructure investment. We're tracking those results as well.
The Chair: You are saying that 4,000 young people out of the 14,000 went back to school. Do you actually measure whether they graduated or not? If the graduation rate is at 57 per cent, the number varies, but historically over time, depending on if you're 18 or 20 years of age in the indigenous population, there's somewhere between a 50 and 60 per cent completion rate. Do you actually track that to see if your money is being well spent?
Mr. Thompson: This isn't a post-secondary employment support program. There are programs that do that through Indigenous and Northern Affairs, for example.
The Chair: Do you track the completion rate of technical programs that may be a six-month or three-month program?
Mr. Thompson: We certainly look overall at apprenticeship programs, for example, and we do have challenges on completion rates broadly. I don't have any specific data on indigenous completion rates in apprenticeship programs. I'd have to look.
The Chair: I think there's a linkage. If you're going to spend the money, which we're committed to doing and which makes a lot of sense, it would appear that one of the ways we can get better performance is making the linkages to the specific type of results other than generic results.
I'm not criticizing the results program, but there may be an opportunity to do some creative thinking and tie your results to specific measurements that are maybe a little better aligned. You will be happier and be able to come back and say, "Hey, it's not only the numbers, but here's the completion rate and the various programs. Here are the number of jobs and the length of time the people were on jobs.'' It may be a full-time job that only lasts six months. It may be deemed full time but it may not have a period. Maybe I'm off the charts.
Mr. Thompson: Not at all. My colleague mentioned that we're continually doing improvements of our performance measures. In this program we would like to indeed go beyond just jobs to the quality of the job, the sustainability of the job, and whether it's linked to other initiatives in that community or region.
The Chair: Any other questions from senators? Senator Unger.
Senator Unger: I would like to try to pinpoint one particular issue that's mentioned with regard to funding for Aboriginal Skills and Employment Training. I see along with housing construction water treatment, child care and local.
Specific to water treatment, which is a huge issue, I'm wondering if you went back over 10 years, if you could give specific examples of what would be a success in water treatment training. Is this a fair question? I'm not sure. To me that sounds like a great idea. Are there any successes, if you will, where you could say that over the last five years so many reserves have been able to start looking after their own water needs, ensuring clean, safe drinking water?
Mr. Thompson: Water treatment is an example of a type of intervention. I don't have data with me on progress made to date. This was an example, though, of a modest need in many communities. Each individual community may need one person, for example, trained in water treatment, so it would be hard for them on their own to develop a training program.
What we were trying to do here is be a catalyst for collaboration so there could be a common investment in curriculum development and training programs to meet the need for water treatment plants across the country.
The lead is really with other departments in terms of the level of investment in water treatment. The intention was that this was a complementary investment in skills development to go with that. We will do our best to measure the outcomes as the investment comes to fruition.
Senator Unger: Do you prioritize issues like these? They're quite varied from housing construction to child care. Is there a priority set on one or any of these other particular issues?
Mr. Thompson: It's basically on community needs. This was an interim investment to provide some additional resources to the service delivery organizations and to do it in a way that aligns with emerging community needs.
We're takers of the priorities from our service delivery organizations. We have 84 agreements across the country of service delivery providers, so we're reliant on them to identify the priorities in their own communities. We were using this fund to help advance some early investments in that area.
The Chair: Mr. Perlman, do you do any infrastructure planning?
Mr. Perlman: Like actual infrastructure like bridges?
The Chair: Yes. There are 10 departments that do $1 billion of projects, and they haven't released any of the information. In our infrastructure study we'd like to try to ask open-ended questions to see whether there's any involvement. If we get no as an answer, we'll go to the next group.
Mr. Perlman: Not on physical infrastructure, no. On social infrastructure we do.
The Chair: Senator Marshall, do you have a question you wanted to ask before we finish?
Senator Marshall: I do. You're talking about infrastructure and social infrastructure. There's a lot of coverage in the media lately about daycare and the financial ability of parents to pay for daycare. It seems like the government may do something in that direction. Would that be your department? I'm interested in that. Then I have follow-up questions.
The Chair: I'm impressed that you keep your sign with you all the time. You must be an important person within that department.
Mr. Murphy: Yes, senator. We are indeed. We're working on two parallel tracks on child care, early learning and child care, one with the provinces and territories. Just to say, as Mark said, this is funded out of social infrastructure. We're working with provinces and territories to finalize an early learning and child care framework. Again, the principles there are affordability, inclusiveness and quality. What evidence tells us is really important for early learning and child care.
What's really exciting as well is that on the parallel track we're working with indigenous organizations and communities for an indigenous early learning and child care framework. As Paul alluded, part of the existing federal programming is run out of our department too. He mentioned ASETS. There's a First Nations and Inuit child care component to that.
I think getting that framework along with the provincial-territorial framework will be a big accomplishment.
Senator Marshall: We've been studying infrastructure and we've been talking about social infrastructure. I would think that daycare centres or some facilities for daycare would fall under that. Would that infrastructure component be under your department?
Mr. Murphy: It is in the sense that we will be transferring money to provinces and territories. They will be making investments according to the principles that both governments end up agreeing to. I would imagine affordable child care spaces will be a major emphasis. Also quality will be a very important component. Then there are issues around access.
One of the issues I know we've heard from other committees is providing child care for people who work non- standard hours or child care in rural and remote areas. We're trying to work with provinces and territories to have an inclusive approach.
Senator Marshall: You don't deliver the infrastructure money directly to daycare centres or community groups. The money is going to the provinces, and the provinces are delivering the money.
Mr. Murphy: That's correct, senator.
Senator Marshall: That's very helpful. Thank you.
Senator Mockler: Just to follow up, do you have a management committee between the provinces and the federal government to decide how to prioritize those projects?
Mr. Murphy: We have at the deputy minister level a working group committee. At this point, senator, what we're doing is working on that overarching framework that will guide this social infrastructure funding. That will be followed by bilateral agreements with every province and territory to actually flesh out where those investments will go in accordance with the framework.
Senator Mockler: I know that you're being challenged. We are all being challenged, as a matter of fact governments across Canada, with the aging of the population. With respect to your mandate and the philosophy of your department, what are your biggest challenges right now with aging of the population and this social infrastructure that you're looking at in order to help the provinces?
The Chair: Especially in New Brunswick. Is that correct, senator?
Senator Mockler: The tale of two countries east of the Ottawa River and west of the Ottawa River.
Mr. Perlman: My colleague Kathryn McDade will speak to you.
The Chair: Great to see you back, Kathryn.
Ms. McDade: I'm not as fast with the name tag as Doug.
Senator, you're asking about investment to support the aging population and linking it to social infrastructure. Under the framework that the government established in Budget 2016 on social infrastructure there are a number of areas of investment, some that fall outside of ESDC, that are related to supports for seniors. Probably the one closest to our department is the work that Canada Mortgage and Housing Corporation is doing on seniors' housing as part of the National Housing Strategy, which is an element of the social infrastructure plan.
A little earlier we were talking about the Homelessness Partnering Strategy that is within ESDC and also funded under the social infrastructure plan. It is another area where seniors don't make up a significant proportion of the homeless population, but they are a growing proportion of the homeless population. The most recent shelter study showed that the proportion of people using shelters who are over age 50 has grown over the past decade. Within the social infrastructure envelope, that's the investment I would point to for seniors.
Outside of social infrastructure, ESDC is responsible for pension programs. One of the most significant investments in Budget 2016 was an investment in the Guaranteed Income Supplement for single seniors.
My colleague Cliff was talking earlier about the forecast for Old Age Security investments over the next 10 years, which includes the Guaranteed Income Supplement. Mark talked about year-over-year change in estimates for that program, and that is a product of population aging.
Senator Mockler: Can you apprise us of your philosophy with regard to home care, nursing homes and special care homes? Those are three different types of services. What is your role when you talk to the provinces? Have we had any increase in the budget?
Ms. McDade: We at ESDC have not been part of those conversations with the provinces. Our colleagues at Health Canada, and to a lesser extent the Public Health Agency, are supporting Minister Philpott in the conversations on home care and long-term care with the provinces, but we've not been directly involved.
The Chair: Without any further questions we'd like to thank our visitors for coming to us and being so open with your answers.
We are continuing our examination of expenditures set out in the Main Estimates for fiscal year ending March 31, 2018. We now have two departments before us. From Global Affairs Canada, we welcome again Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer, and Shirley Carruthers, Acting Director General, Financial Resource Planning and Management Bureau.
We also have officials from the National Defence and the Canadian Armed Forces: Brigadier-General Werner Liedtke, Deputy Chief Financial Officer, Director General, Financial Management; Colonel Sylvain Ménard, Director, Defence Program Coordination; and André Fillion, Chief of Staff Materiél. I actually worked for an André Fillion.
[Translation]
He was a well-known psychologist in Montreal for many years. Perhaps you have heard of him.
[English]
Mr. Thangaraj, you are up.
Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer, Global Affairs Canada: Good afternoon, Mr. Chairman. On behalf of my colleagues Shirley Carruthers, Dave Metcalfe and Pamela O'Donnell, who are here from our programming areas, thank you for the invitation to appear today before the committee. I'll make a couple of brief opening remarks, after which I'll be pleased to answer your questions.
[Translation]
In the coming year, Global Affairs Canada will work to advance Canada's interests internationally in an increasingly dynamic and unpredictable global environment with emerging global players. The department will promote Canada's values and interests internationally, focusing on enhanced prosperity, alleviating poverty, addressing humanitarian and global security challenges and serving Canadians at home and abroad.
Global Affairs Canada has an important role to play in promoting inclusive prosperity, where economic growth within Canada and around the world produces tangible benefits for everyone.
[English]
The department is developing a new trade and investment strategy in 2017-18. It's focused on increasing Canada's trade and attracting job-creating investment to Canada, expanding trade with large fast-growing markets including China and India, and deepening our trade links with traditional partners.
Over the past year we have worked to refocus our international assistance programming through consultations with over 15,000 partners and individuals in over 65 countries. The renewed Canadian international assistance policy and funding framework will focus on protecting and promoting the human dignity of the poorest and most vulnerable. Women and girls will be at the heart of this new approach.
[Translation]
The department is improving delivery of Canada's humanitarian assistance by providing more flexible, predictable, multi-year funding; prioritizing gender equality and local capacity, and better integrating our humanitarian and development efforts. As an example, the department has put this new approach into practice through Canada's commitment of $1.1 billion over three years to support those impacted by the crises in Iraq and Syria.
In August 2016, the department launched the new Peace and Stabilization Operations Program. This program will anchor whole-of-government coordination and responses to international crises with a focus on stabilization efforts in priority countries including Afghanistan, Colombia, Haiti, Iraq, Jordan, Lebanon, Mali and the Sahel, Myanmar, Syria and Ukraine.
[English]
We have also increased our support for international conflict management and are contributing to multilateral efforts to fight terrorism and extremism. One way we do this is through our counterterrorism and anti-crime capacity building programs, which work with beneficiary states and international organizations such as the United Nations Office on Drugs and Crime. This includes efforts to prevent prison-based radicalization and working with Interpol to better connect police service to real-time information on suspects and to upload the information so that it can be more widely accessed by others including police agencies in Canada.
For these 2017 Main Estimates, the department's total expenditures requested total $6 billion, which represents a net increase of $486.6 million over last year's Main Estimates. The net increase includes new funding of $240 million to increase Canada's diplomatic, security, humanitarian and development assistance engagement in the Middle East.
Global Affairs will enhance Canada's presence and diplomacy in the region and expand our programming, specifically humanitarian assistance and projects funded by our Counter-Terrorism Capacity Building Program.
[Translation]
The funding provides a multi-year, flexible and integrated response given the fast-evolving circumstances in the region which generate unpredictability and risk. Through an expanded and enhanced presence on the ground, Canada will be better positioned to strengthen and influence relationships with key partners and allies. In addition, it allows the department to undertake a more systematic and effective monitoring of Canadian programming, activities and objectives.
In addition, $214 million is requested for the Peace and Stabilization Operations Program (PSOPS) to enable efforts to prevent and respond to conflicts abroad and support UN peace operations.
[English]
In addition, $41 million is requested to help developing countries address the impact of climate change through the second phase of the climate fund for the private sector.
This fund aims to play a key role in helping the private sector overcome technology risks and cost hurdles to initiate and scale-up projects in eligible countries to reduce greenhouse gas emissions and increase climate change resilience.
Global Affairs is proposing to fund an unconditionally repayable contribution to help low and lower middle income countries in Asia and the Pacific region reduce their carbon footprint and adapt to the adverse impacts of climate change by catalyzing private sector investment.
These increases are offset by a reduction in the cost of our assessed contributions of $25 million. This reduction is due to two factors: first, currency fluctuations and second, the changing obligations we have to international organizations such as the United Nations and the World Health Organization.
There is also a decrease of $11.9 million due to the impact of foreign currency fluctuations incurred on expenditures at missions abroad.
[Translation]
In delivering on these initiatives, the department will continue to collaborate with other federal entities and provincial, territorial and municipal governments, and engage constructively with a diversity of Canadian and international stakeholders.
[English]
We will also ensure the highest standards of service to Canadians, particularly those requiring consular assistance abroad, by having access to emergency consular assistance when in distress 24 hours a day, seven days a week, through Global Affairs Emergency Watch and Response Centre.
The department also maintains a Standing Rapid Deployment Team to provide surge capacity to respond to critical incidents affecting Canadians or Canadian interests abroad.
[Translation]
Global Affairs Canada is one of the most complex departments in the Government of Canada. We manage Canada's international platform — a global network of 179 missions in 109 countries, which provides a range of services to Canadians and Canadian businesses, while also supporting the international work of 37 partner organizations located in the missions, such as federal departments and agencies, Crown corporations and provincial governments.
[English]
Global Affairs continues to place an emphasis on prudent and careful financial management to deliver its mandate in a sustainable, effective and efficient manner. We are committed to measuring our performance and communicating these results to Canadians, ensuring our efforts have the greatest positive impact.
Thank you. I will be pleased to take your questions.
Brigadier-General Werner Liedtke, Deputy Chief Financial Officer, Director General, Financial Management, National Defence and the Canadian Armed Forces: Thank you again, Mr. Chair and senators, for the opportunity to present the Main Estimates for the 2017-18 fiscal year on behalf of the Department of National Defence and the Canadian Armed Forces. My colleagues and I look forward to reviewing this important information before the committee.
[Translation]
The focus of National Defence and the Canadian Armed Forces remains on our three enduring roles: protecting Canada's interests at home and abroad, defending North America, and contributing to international peace and security. Defence continues to conduct missions as part of a whole-of-government approach to defending Canada's interests and keeping Canadians safe and secure. These Estimates reflect that focus and put defence dollars there they are needed most.
It goes without saying that the magnitude, complexity and visibility of the 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.
[English]
These Main Estimates reflect a determined and comprehensive effort to direct and allocate defence dollars responsibly and appropriately across a broad spectrum of related activities in support of defined corporate priorities during fiscal year 2017-18.
Turning to the Main Estimates before you, I would like to highlight key points for the committee on page 112 in the English version and page 176 in the French version. It should be pointed out that the Main Estimates before you were prepared in late 2016 as the defence policy review was continuing. Consequently, the financial implications of any decisions that may arise from that review have not been taken into account.
[Translation]
The bottom line for National Defence is a forecasted net increase of 0.1 per cent ($21.8 million) from the Main Estimates figure approved for fiscal year 2016-17 (from $18.6 billion to $18.7 billion). This net change reflects both increases and decreases across the departmental vote structure, which can be summarized in four main points.
[English]
Operating expenditures in vote 1 are forecasted to increase by 3.2 per cent or $436.5 million, which is largely attributable to the defence escalator. The Government of Canada took action to recognize the inflationary impacts on the defence budget and stabilized funding when the 2 per cent defence escalator was announced in Budget 2008 and the 1 per cent additional escalator was announced in Budget 2015.
Capital expenditures in vote 5 are forecasted to decrease by 8.6 per cent or $293.2 million. The request in the Main Estimates reflects the department's effort to align the requirement for financial resources with current project timelines. This realignment of project timelines is due primarily to a variety of operational, logistical and program factors affecting the timing of spending on major capital equipment and infrastructure projects.
The forecasted reduction in authorities also reflects the Department of National Defence and the Canadian Armed Forces commitment to continue to maintain strong fiscal responsibility and careful stewardship of resources in recognition of the fiscal environment in which we are operating.
Grants and contributions in vote 10 are forecasted to increase by approximately $100,000 for minor increases and decreases to various grants and contributions programs.
Finally, the statutory authorities allocation would decrease by 9.2 per cent or $121.6 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 our essential national mandate while embracing fiscal responsibility and effective stewardship of resources.
[English]
Thank you. My colleagues and I would be pleased to address any questions or comments you may have.
The Chair: Thank you, general. We will begin questions.
Senator Pratte: I'm interested in the decrease in capital expenditures. I must say I'm a bit confused. It happens often that I'm a bit confused, and it's the case again.
I'm trying to understand whether it's really significant from the point of view of investment in capital equipment. I have the impression that it's a matter simply of some projects having been completed and the fact that you used the escalator of 3 per cent to maintain some equipment.
Can you tell me whether there's really a decrease in investment that is significant from the point of view of capital, or whether it's simply that you are displacing some budget and that there's no significant impact, either from a maintenance point of view or from an investment point of view?
Brig.-Gen. Liedtke: Yes, thank you for the question. To answer the first part, you are correct. To a large extent, these supplementary estimates match the actual requirement for the funding with where the project is in the lifecycle. In a few moments, I'll ask Mr. Fillion to give you a bit of an update on the program writ large.
Another thing we're doing this year is something much more deliberate in that we are taking a more rigorous approach to how much funding we bring in through the Main Estimates. In the past, if we had the ability to bring in the cash, we simply brought it in. That generated some significant lapses over time.
Now we're being much more strategic in how much we bring in. Also, we'll use the entire estimates process to actually determine how much we'll need by the end of the year.
For example, on the Arctic offshore patrol ships we are going to bring in $250 million less funding than we expect to spend. What we'll do is, throughout the year, if there is slippage in any other program, we will then use that cash to fund the ships. If this is a year that everything is executed and according to plan, we will come back at Supplementary Estimates (B) and (C) and request that $250 million.
I want to give you an example of the effect. In 2014, we requested a reprofile of approximately $1.3 billion for capital projects. We started this initiative last year and we reduced that reprofile to $700 million. For this year, 2016- 17, our current estimate is to be in the $400 million to $500 million range. We're trying to use the entire process to minimize the amount of funding we bring in at the start and reduce our lapse.
The other part of your question, sir, was about whether we use the escalator to offset capital. In actual fact we use the escalator more on the operating side. We generally don't use it for capital, although the flexibility does exist for the department.
If you would like, I can ask Mr. Fillion to give you a program view.
André Fillion, Chief of Staff (Materiel), National Defence and the Canadian Armed Forces: I would say, to maybe complement some of the comments made by General Liedtke, every project starts by not spending any money and finishes by not any spending, and at some point a lot of money is spent. If we look at the Halifax-class modernization, a $4.3 billion initiative, the 12th or last ship was delivered late last year. We will not pull a lot of money for that project, as it is nearing its end and as the ships are getting back into the Royal Canadian Navy for service.
At the same time we look at what the request is for the Arctic offshore patrol ships. We are discounting it by about $250 million, although we are actually building two ships at the Irving Shipbuilding industries in Halifax at the moment and a third one will start this year.
We have taken this measure to try to minimize the amount of lapse. Some projects begin to spend; some projects stop spending. Overall we try to manage it as much as possible so that we don't lapse.
If I could add, though, in the past year we have implemented many measures on the materiel side to try to minimize slippage by doing some forensics on why we continue in some cases to overestimate the amount of money we need. Some of these forensics led us to measures we have taken on how we forecast contingencies. Every project has a contingency assigned to it. Each project manager guesses when the contingency will be required. Keep in mind that most projects don't use all of their contingency, and many don't even use much of their contingency. We have improved the rigour there of how we forecast contingency for the life of a project.
Similarly, we have looked at a bottom-up approach to managing milestones. Every project has a whole bunch of milestones and milestone payments. You can take, as an example of a milestone, an engineering report that is due in March of a fiscal year worth $100,000. If you are a manager of one of the hundreds of projects that we have, you will likely ask for that money to be put in your forecast so that you can get the money just in case the report is due.
In some cases there are scheduled risks associated with these reports being delivered at a given date. If it's late in the fiscal year, chances are it will be delivered in the following year. That leads to institutionalized conservatism in the estimates that we are trying really hard to eliminate, with a view to reducing the lapsing of actual cash.
Senator Pratte: What is the typical contingency percentage on a large project like a ship or something like that?
Mr. Fillion: I would say usually it's in the region of 10 to 15 per cent. Typically, most projects do not use a lot of their contingency. However, the expenditure authority is there. It can amount to a lot of money being forecasted to be spent, even though it is not needed. That's why we kind of tightened up the measures around how we actually forecast contingency and the use of it in terms of forecasting future year expenditures.
Senator Pratte: But 10 to 15 per cent compared to large infrastructure projects is not particularly large, though.
Mr. Fillion: The amount of the contingency depends on the project itself. It depends on its complexity and the risks. The CFO and the costing analysts determine the appropriate contingency, based on the risks and the complexity of projects. I'm using 10 to 15 per cent from experience, from what I've seen on most projects.
Brig.-Gen. Liedtke: Your point, sir, is correct. It depends on the project, where you are in the life of the project and the element of the project. As they cost each point or part of the project, they will determine what would be the acceptable level of risk related to that line. Even if it's an aggregate of 15 per cent, it could be that a line item related to a people component may be only 5 per cent but another complex system may be 30 per cent. It very much depends on what part of the cost element we're looking at in the project itself.
Senator Marshall: I also have questions for National Defence, but I just wanted to follow up on Senator Pratte's question.
Is this the first year that you have staggered bringing your budget in? Is this the first year you have tried that?
Brig.-Gen. Liedtke: No, we started it last year when looking at some parts of the capital program. That's why we had some success going from 1.3 billion to 700 million. Since we had so much success last year, now we're really rolling it out across the entire program.
Senator Marshall: You didn't want to lose momentum because the budget was tighter, did you?
Brig.-Gen. Liedtke: No, we did it in order to make sure that we are actually using our cash effectively and managing the program.
We don't only do this on capital. We'll use the example of operations. In actual fact, you'll notice in these Main Estimates that we are not actually requesting funds for deployed operations. We actually manage it for the early part of the year so that we get more clarity on what the roles and the missions will be, so that we don't over-ask for money through estimates and we ask for the amount that we actually need.
To give you an example, the coalition in Iraq defines a lot of the operational requirements, for example how much we fly. Therefore we have an estimate but we wait until we have a greater certainty of what the actual plan is so that we ask for the right amount of money.
Senator Marshall: Are you able to give us an update on the defence policy review? You mentioned it in your opening remarks. You said that there wasn't anything in the Main Estimates relating to that because it's not finished yet. Are you able to give us an update as to when we would see something?
Brig.-Gen. Liedtke: I can't answer that, but I know that it is presented before government and we are awaiting a decision. We would anticipate that once the decision is made through future supplementary estimates and/or Main Estimates we'll see what funding requirements, if any, fall out of that.
Senator Marshall: Last year the Auditor General did an audit of the army reserves. I think it was in last year's spring report. I didn't find the audit very positive. I found that it was negative, and it covered a variety of areas. I'm speaking from memory now.
I think it covered training, the number in the reserves, the resources provided, and the integration with the regular service. Can you give us an update as to exactly where that audit is? First of all, is there any additional funding in the Main Estimates that would look after some of the issues identified by the Auditor General?
Brig.-Gen. Liedtke: There are no additional funds in this now. Any of the changes would be from within the existing reference levels, but I'll ask Colonel Ménard to give you an update on that.
Senator Marshall: Could you give us an update as to exactly what is happening with the reserves?
Colonel Sylvain Ménard, Director, Defence Programme Coordination, National Defence and the Canadian Armed Forces: Thank you for the question. I would like to start by wishing you a happy International Women's Day.
To answer your question about the measures taken, on January 30, 2017, we tabled the official response to the Standing Committee on Public Accounts report. Right now, the Canadian Armed Forces are currently determining how to best allocate funding to the army reserves while also improving recruitment and retention strategies as we speak. We're developing a procurement plan for equipment to better equip the reserves, as well as working on augmenting collective and individual training to improve the quality of the reserves.
These are the main actions we are doing now, but I think we are still developing the way forward based on the recommendations in the report.
Senator Marshall: In your opinion is the funding provided now in the Main Estimates sufficient to address the issues that were raised by the Auditor General?
Brig.-Gen. Liedtke: Right now the department is finalizing its response and will develop an action plan. Through the development of that plan we will identify if additional resources would be required to satisfy those recommendations.
Senator Marshall: Would the reserves be included in the overall policy review?
Brig.-Gen. Liedtke: Yes, they are.
Senator Marshall: Anything additional should be either in Supplementary Estimates (A), (B) or (C) this year, I would expect.
Brig.-Gen. Liedtke: Yes. We will be able to actually answer that once we understand what is approved in the policy review. We'll be able to confirm that all of the issues have been addressed, if that's your specific question, senator.
Senator Marshall: Could I have second round for the check on Global Affairs?
The Chair: Could I ask a supplementary to your question, senator?
Senator Marshall: Sure.
The Chair: Historically over time there have been certain situations where the regular army takes money out of the reserves budget. I'm wondering: Is that a good practice? Is it still continuing?
Brig.-Gen. Liedtke: No, sir, it is not.
The Chair: When was it changed? It was in force right up until at least last year.
Brig.-Gen. Liedtke: At the beginning of last year, the chief of defence staff and the deputy minister issued a directive that we would have more formal controls over reserve funding. Within our financial accounts structure we have what we call corporate accounts. All reserve funding is in there. Any transfer out of the reserve account into the general operating budget must be approved through our investment and resource management committee, which is chaired by the deputy and the chief is a member.
So far in 2016-17, all requests to transfer money out of the reserve fund were denied but there's flexibility to move money to the reserve fund.
The Chair: Of course you realize the reserve funds have been cut substantially in the last five years, down to about 700,000 from about a million. At one point in time it was significantly higher.
Is the leadership in the Armed Forces really addressing the needs to have a strong reserve force in the role of the reserve force?
Brig.-Gen. Liedtke: From a fiscal perspective, absolutely. That's why we have maintained control of the funding. I'll ask Colonel Ménard to respond from an operational perspective.
Colonel Ménard: Mr. Chairman, from an operational perspective we recognize that we have an average base strength of approximately 27,000 members. Due to the importance of reserves to the overall Canadian Armed Forces component, we have an aggressive target to reach of 28,500 by 2019. This is a testament to the emphasis that we put on the reserves component of the Canadian Armed Forces.
Senator Marshall: Is there sufficient funding in the budget now to get to that level? Is there enough funding in the budget to resource if you had the 28,000 or 29,000 individuals that you say is your target?
Brig.-Gen. Liedtke: Yes, we have enough funding for the 28,500.
The Chair: Will you accelerate the recruiting process? Sometimes it takes up to 15 months or 16 months. For an enthusiastic young person or even a 40-year-old person looking to change their life who wants to get into the reserves it takes a long time because of the red tape. Is there any move to try to accelerate that so that you can get your numbers in?
Colonel Ménard: Mr. Chairman, we are looking at streamlining the recruiting process as much as possible. We are studying how we can best do that across the armouries within the country to facilitate this influx of new reservists.
Senator Marshall: When I read that audit report last year I must say I was very disappointed. I'm hopeful that changes will be made within the department so that you can build up the reserve and properly resource it.
Senator Woo: Welcome back. Thank you for your testimony. If I may start with Global Affairs, this is a small item relative to the overall budget. You did highlight it in your presentation so I do want to get a bit more information. It concerns the climate fund for the private sector.
Subsequent to that reference there are three paragraphs on climate/private sector. I think the first two are related. You called it the climate fund for the private sector for $41.3 million. Then the next item seems to be also about some kind of private sector initiative to reduce climate impacts in the Asia-Pacific region.
The first question is simple: Are they the same thing?
Mr. Thangaraj: Yes, they are the same thing.
Senator Woo: Could you clarify which private sector are we talking about and what is the implementation mechanism? Is it the private sector in developing countries or is it the Canadian private sector to execute projects in those parts of the world?
Mr. Thangaraj: When we were here for Supplementary Estimates (C) we talked about some of these funds. These are financing windows that we establish through multilateral development banks. For example, this would be a $41.3 million fund with the Asian Development Bank. It will allow private sector corporations, whether they be Canadian or in developing countries, to launch initiatives to either mitigate the impact of climate change or to allow, for example, the agricultural sector to adapt to those initiatives.
Senator Woo: I apologize if I made you repeat your answer.
Mr. Thangaraj: No, that's fine.
Senator Woo: Repetition is the best way of learning. Thank you for that.
Perhaps I could ask you about consular services which is on the last page of your presentation, and do tell me if you've answered this question already. I'm trying to understand how you see the different client groups when it comes to providing consular services, how you plan and how you forecast.
I can imagine consular services going to tourists, Canadian students abroad, diplomats and Canadians who are living abroad, ex-patriots. Do you have a way of breaking down the different client groups and projecting their needs?
Mr. Thangaraj: We do. Part of that is, for example, analyzing demand. If you look at 10 years ago there were about 30 million Canadians who were travelling. Last year I think we were up to 34 million. That is going to drive the type of consular support that we provide. The numbers drive the services we provide, but we also look at where people are travelling as well.
We look at whether they're travelling to areas that are subject to greater instability. We have to make sure that both our mission network and our headquarters operation are sufficiently resourced to react. One of the things that we are also doing is looking at how we engage on consular services.
In our network of mission consular officers, we have at headquarters a consular section that often deals with some of the more complex consular cases. We have in the organization the capacity to respond rapidly and deploy resources when required. We also look at push technology. We have an app on the App Store that allows Canadians access to the registry of Canadians abroad, the database. When they register, we can push notifications about changing circumstances. We're trying to leverage technology as much as we can to provide services that we used to use human interaction to provide.
Senator Woo: In the unfortunate circumstance of emergency evacuation, and there have been some spectacular examples in the last 10 to 15 years, does the Government of Canada have the capacity and right to ask for some reimbursement of costs?
Mr. Thangaraj: We have a specific fund that provides funding or emergency loans to Canadians in distress, and those are to be repaid. We do provide the advance and they are repaid. In general when there are significant events we do have what's called the Standing Rapid Deployment Team that we mobilize. It's a headquarters-based group with various consular and security expertise that we will deploy to those areas so that we can address those things on the ground.
Senator Woo: That's not a loan,
Mr. Thangaraj: That's a service that we provide. That's correct.
Senator Woo: That comes out of the budget.
Mr. Thangaraj: The appropriation budget, yes.
Senator Woo: Thank you again for your presentation. The last time you were here I had a question on NATO. If I could continue that line of questioning, only because I'm going to D.C. in a week's time and I fully expect there will be discussions on Canada's contribution to global security broadly but NATO more specifically.
I remember your telling us that Canada is the sixth largest contributor to NATO and that in fact our contribution may be more than it appears. I understand that we're at 1 per cent of our GDP perhaps, or 1 per cent of some measure of GDP, and that the Americans want us to move up closer to 2 per cent.
In the Main Estimates I see three line items that have NATO specifically highlighted, adding up to a total of about $140 million. Would that be the base calculation for our contribution to NATO? If it is, can you tell me a bit more about what else we can talk about to give a more fulsome picture and a more accurate picture of Canada's true contribution to NATO?
Brig.-Gen. Liedtke: Yes. Thank you very much for that. Also I wanted, Mr. Chair, to correct the record. Last week I mentioned that Canada's contribution was approximately $180 million. That figure should be $140 million. I'm glad, Senator Woo, that you asked the question again so that I can also correct the record from last week.
The $140 million represents that all nations that are participants in NATO pay a share of NATO's costs. There are three separate budgets in this case. There's a military budget, an investment program budget, and then a bunch of small ones. Canada contributes 6.6 per cent of what NATO's funding requirements are in a year. The $140 million that you're seeing here is our share of that based on our cost percentage.
It's important to note that is an estimate right now in Canadian dollars but we do make the payment in euros and it may fluctuate slightly due to exchange rates.
Getting back to the other part of your question with respect to NATO writ large, the 2 per cent measure is about defence-related expenditures. What we're examining right now is whether we are reflecting defence-related expenditures across the Government of Canada in the same manner as our allies. We've done quite a bit of work on discussing it with our allies. We've also gone to NATO to talk to the headquarters staff.
To give you some examples, our GAC colleagues do a lot of important work to support peacekeeping and humanitarian operations. This is an allowable defence-related expenditure. As we come up this April and redo our biannual return, we will seek their input into doing that. It is the same with our colleagues in Shared Services, Public Services and Procurement Canada. We are trying to understand through our discussion with NATO what is the box around the 2 per cent to make sure we are optimizing what we are allowed to capture under the 2 per cent. That work is being done right now because April is when the next formal update is due to NATO.
In anticipation of a conference, NATO has asked us to update the 2016 actual expenditures in January, and we have done so. Our rate will go up to about 1.02 based on that. It's about .99 now. It's going up slightly based on the update.
The challenge with these figures is that when we do the report they're looking back two years but they're trying to get us to project six years forward. The numbers you're seeing now for the future were numbers that we provided two years ago.
The last thing I would say to respond to your question, sir, is that we have to remember that it is defence-related spending divided by GDP. The challenge we have is that if you're in a nation with a very good and strong economy and your GDP goes up, by default your defence-related expenditures to GDP go down. The GDP side of the formula is also a challenge.
The Chair: General, was there mention in the recent newspapers that the defence minister had planned to increase spending up to 1.2 per cent? Was that discussed or put into the papers?
Brig.-Gen. Liedtke: I'm not aware of the specific article. As I mentioned, sir, we look at what our other government departments are doing. If we calculate all of that and get it updated, it could get us up to 1.2 per cent, but we are revalidating that as part of the new process.
The Chair: I thought I read it somewhere because it does make a material difference.
Brig.-Gen. Liedtke: Absolutely.
[Translation]
Senator Forest: Thank you for your presentations. I have two quick questions regarding National Defence. First, on page II-123, it says there will be an increase in the annual escalator on defence spending as announced in Budget 2015 to provide long-term and predictable funding. That is a commendable objective. What escalator factor is National Defence seeking on that spending? It is 3.2 per cent this year, and was 2 per cent in 2008. There was a 1 per cent increase in 2015. Is your escalator factor 3 or 2?
Brig.-Gen. Liedtke: The annual escalator factor includes two elements. The first is the 2 per cent increase set out in the 2008 budget. That was approximately $368 million. Starting in 2017-18, we will receive an additional 1 per cent of our budget, or $184 million, for a total of $552 million. So that is a 3 per cent increase, which was already established. In 2018-19, it will be a 3 per cent increase on the $552 million.
Senator Forest: Of the total, so 3 per cent more each year.
Brig.-Gen.: Yes.
Senator Forest: So that is 30 per cent over 10 years, regardless of the inflation rate.
Brig.-Gen.: Yes.
Senator Forest: So when there are major acquisitions, such as ships, submarines and so forth, is that added to Canada's overall debt? Do you pay for that debt or is it funded from your own budget?
Brig.-Gen. Liedtke: I think that is a question for the finance department. We have an investment plan that includes the amount we need for all our projects, and we receive funding. I do not know how the finance department finds the money or if it is part of the debt.
Senator Forest: For example, if you order two ships in Halifax, do you pay for them by cheque or do you borrow against your obligations?
Brig.-Gen. Liedtke: I am not entirely sure. We receive approval through our estimates, and the finance department gets the money.
Senator Forest: I have a question for the Global Affairs Canada officials. Last week, I asked whether new cultural attaché positions would be created at embassies and the answer was no. Considering that Canada is the third largest exporter of music in the world, a truly enviable position that highlights all the potential in Quebec and in Canada, how does your department intend to promote Quebec and Canadian culture abroad, in the 150th anniversary year in particular?
[English]
Mr. Thangaraj: The department has two main avenues of promoting culture and other industries. One is that we use our foreign policy or diplomatic service. Through our embassies we showcase not only Canadian music but Canadian artists and sculpture through various events.
As we discussed last week, it's funded by the Canada 150 initiative, but in general we use our Trade Commissioner Service throughout the network to promote our cultural industries, whether that be music, artists or film industries throughout our network. We leverage the resources we have to promote that industry.
[Translation]
Senator Forest: Here is my final question. You indicated that your department will spend over $3 billion abroad. How do you create the list of countries that are given priority? Is it based on criteria such as GDP or the poverty rate? What are the factors determining where we will invest among the list of countries that you mentioned earlier? Some are obvious, but why one country over another? What criteria are used in making that selection?
[English]
Mr. Thangaraj: Part of the focus of the International Assistance Review is looking at the countries where we work, the criteria we're going to establish and the countries that we work with bilaterally in international development.
With respect to the peace and security program I'll ask Pamela O'Donnell, who works in that program, to come up and explain that.
Pamela O'Donnell, Acting Director General, Peace and Stabilization Operations Program (PSOPs), Global Affairs Canada: I am going to speak in English, or I'll mix up my French with Spanish and that wouldn't be good.
In the Peace and Stabilization Operations Program we did quite extensive consultations with other government departments within our mission network and with other countries to identify those countries that should be the priority for our activities. We looked at the level of fragility and conflicts, numbers of people displaced, numbers of people dying and the severity of the crisis. We looked at Canada's capacity to respond. Do we have a niche there? Does Canada have a network, a reputation on the ground where we could actually intervene and make a difference? Do we have the resources to do this? We looked at what our allies are doing. Do we have people we can partner with on the ground?
We looked at a lot of different things to determine where our priorities should be. Then we picked six priority countries and a number of tier-two countries where we would do just a bit.
The Chair: Would you do a favour for us and repeat your name and tell us your position? You forgot to do that. You were so excited to come to the table you forgot to do that. We like the enthusiasm.
Ms. O'Donnell: It's Pamela O'Donnell. I'm the Acting Director General for the Peace and Stabilization Operations Program. Normally I'm the director of the actual programming division there.
The Chair: How did you go from a director to an actor?
Ms. O'Donnell: My boss is in the Ukraine right now so I'm acting.
[Translation]
The Chair: Does that answer your question, senator?
Senator Forest: Yes, very well, Mr. Chair.
Senator Mockler: My question is for National Defence. Do you foresee any changes at the base in Gagetown, New Brunswick?
Col. Ménard: I do not have any updates about the Gagetown base in particular, but I can get back to you with more details.
Senator Mockler: Since you will be reviewing the Gagetown base, could you also tell us the provinces where there will be changes? I am saying that because, on page II-124, you request a credit, which is related to NATO. You had $92.4 million in the Main Estimates, and that is now reduced to $77.9 million. Can you explain that decrease? If we are talking about security and Canada has to participate in international missions, how do you explain this difference in the budget?
Brig.-Gen. Liedtke: It is because these funds are for NATO, for NATO's actual infrastructure.
[English]
NATO develops a broad program across the alliance where they have specific investments, whether it's in missions or in allied countries. The money you're seeing within this grant on NSIP, the NATO Security Investment Programme, is in support of that program itself and not about Canadian infrastructure in support of NATO.
Senator Mockler: Why such a reduction?
Brig.-Gen. Liedtke: Much like us they have a capital program. They developed a program. It's the amount of money they need in a particular year, so it will fluctuate depending on that.
Senator Mockler: What percentage of your procurement would be Canadian versus outside purchases?
Mr. Fillion: I don't have a specific figure for you on the percentage that is Canadian versus non-Canadian, unfortunately, but that's something we could get.
The Chair: Would you do that, Mr. Fillion, and give it to our clerk?
Senator Mockler: Talking about Halifax shipbuilding, are we on target? Can you apprise the committee what we're doing, where we're going, and if you're following the construction side of it?
The Chair: And what the Liberals will get in the next fiscal year.
Mr. Fillion: If you look at the current construction of the Arctic offshore patrol ships, it is really the main activity that is going on at Irving Shipbuilding Industries in Halifax. Two of them are in construction as we speak and a third one will start in the spring time frame, with the delivery of the first one anticipated for 2018. There is a lot going on, for sure, on that side.
As you may recall from previous discussions here, this is a contract that guarantees five Arctic offshore patrol ships, but with a strong financial incentive for the company to deliver on the sixth one. A lot of the profit is tied to the delivery of the sixth ship. We feel pretty confident that within 2021-2022 we will have the fifth or sixth ship delivered. There is a lot of work being done there.
In parallel, work is ramping up on the Canadian surface combatants.
As you may have heard last October, the request for proposal for the selection of the design for the surface combatant was issued and scheduled to close in June of this year. It will really kick off the initial design review and the production design engineering work needed for us to get the detailed design and cost information to lead to the next major milestone in the early 2020s, which is the start of the construction of the surface combatant.
A lot of activities are occurring with the selection of the warship design in the next fiscal year, the start of another Arctic offshore patrol ship, and the delivery of the first AOPS in 2018.
[Translation]
Senator Mockler: Are you satisfied with the quality of the products from Irving Shipbuilding, in Halifax?
[English]
Mr. Fillion: Irving Shipbuilding, as part of the National Shipbuilding Strategy, has made significant investment as part of the National Shipbuilding Strategy in its yard to the tune of hundreds of millions of dollars. They were able to do that because the shipbuilding strategy allows for the Canadian Coast Guard and Canadian Armed Forces to combine the requirements over 20 to 30 years and avoid what we call these booms and busts of stopping and restarting the building of ships.
These investments have led them to develop what is probably a world-class capability for shipbuilding in Halifax, again with the comfort that there will be a throughput over the next several decades that will allow them a return on investments required for such investments. We're working closely with the shipyard and we're satisfied.
The Chair: Any new jobs?
Mr. Fillion: I don't have that number, Mr. Chair, but it's to the tune of thousands.
The Chair: That would be a great selling point for the Armed Forces in terms of your credibility.
[Translation]
You will be spending X amount to cover the period from 2018 to 2021, and so forth. The forecast is X dollars, and the number of jobs could increase by A, B or C.
[English]
It is a nice way to advertise the benefit of what you do.
[Translation]
Mr. Fillion: Exactly, and that is part of the three strategic objectives, the first of which is to supply the vessels that the Coast Guard and National Defence need for the coming decades. The second objective is to revitalize the shipbuilding industry in Canada, which will enable us to achieve our third objective of creating jobs.
[English]
[English]
Senator Marshall: I have a question for Global Affairs. The debt forgiveness for the Republic of Cuba, the $18 million, do we do much of that? Do we lend a lot of money out to other countries?
Mr. Thangaraj: Not anymore. That loan was made in the mid-1970s, 1974 or 1975, and it was for various infrastructures. With any debt there's usually a grace period before which payments have to start.
The Government of Cuba made payments between 1982 and 1986, after which the economy was struggling and it wasn't able to make payments. As part of our debt forgiveness regime we usually require countries to make investments in their own economy. For example, for Pakistan in their debt forgiveness it was in their education sector. There's a corresponding amount that we forgive. To answer your question directly, we don't do direct lending any longer.
Senator Marshall: When that loan originally went out that's considered non-budgetary voted, is it, or is it non- budgetary statutory?
Mr. Thangaraj: It would be non-budgetary voted.
Senator Marshall: It would be non-budgetary voted. Are there other countries that still owe money? Is there a list?
Mr. Thangaraj: Yes. I don't think I have the list with me, but in the public accounts the total is about $557 million for various countries that we have loans with.
Senator Marshall: Is it listed by country?
Mr. Thangaraj: It is listed by country.
Senator Marshall: Is it listed under your department?
Mr. Thangaraj: Yes. We can send that to you.
Senator Marshall: It is $550 million.
Mr. Thangaraj: The number is in my bonnet somewhere.
Senator Marshall: You mentioned Pakistan, and I remember that was an issue a number of years ago. Do we usually collect?
Mr. Thangaraj: On some of them we do collect. There's an adjustment that's made on an annual basis for when we do. When we do forgive there is an arrangement by which we will forgive. Pakistan has that arrangement.
Senator Marshall: I vaguely remember something about that.
Mr. Thangaraj: You will see a drawdown. We have an authority to forgive the debt based on corresponding investments in their education sector. When we can verify they've made corresponding investments, we use part of the authority to draw down that debt. Again you will see that in public accounts.
Senator Marshall: You're saying we don't do that anymore. I looked at non-budgetary voted, and there's not much money there, so we can't be making much in loans.
The Chair: I'd like to thank the witnesses for your time. It's most appreciated. You've been very kind to us.
(The committee adjourned.)