Proceedings of the Standing Senate Committee on
National Finance
Issue No. 60 - Evidence - February 27, 2018
OTTAWA, Tuesday, February 27, 2018
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to examine Supplementary Estimates (C) for the fiscal year ending March 31, 2018 and Interim Estimates for the fiscal year ending March 31, 2019.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: My name is Percy Mockler. I’m a senator from New Brunswick and chair of the committee. I wish to welcome all those who are with us in the room and viewers across this country who may be watching on television or online across Canada. As a reminder for those watching the committee, hearings are open to the public and also available online at sencanada.ca.
Honourable senators, I would like you to introduce yourselves.
[Translation]
Senator Pratte: André Pratte from Quebec.
Senator Forest: Éric Forest from the Gulf region, in Quebec.
[English]
Senator Marshall: Elizabeth Marshall from Newfoundland and Labrador.
Senator Eaton: Nicky Eaton from Ontario.
[Translation]
The Chair: I would also like to acknowledge the presence of our clerk, Gaëtane Lemay, and our two analysts, Sylvain Fleury and Alex Smith, who jointly support the work of the committee.
[English]
Today we begin our consideration of the expenditures set out in the Supplementary Estimates (C) for the fiscal year ending March 31, 2018, which was referred to this committee on February 15.
This morning, honourable senators and viewers, we will hear from four departments on this topic, but first we are going to hear from the Treasury Board Secretariat about the novelty this year, the interim estimates 2018-19.
From the Treasury Board of Canada, we have Brian Pagan, Assistant Secretary, Expenditure Management Sector; Marcia Santiago, Executive Director, Expenditure Management Sector; and Grace Chenette, Executive Director, Financial Management Directorate.
Mr. Pagan, I have been informed by the clerk that you are going to address both the interim estimates and the Treasury Board’s request for funds in the Supplementary Estimates (C). Please make your presentation, to be followed by questions from the senators.
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. It is a pleasure to be here this morning to give you an overview of the two documents tabled by the President of the Treasury Board on February 12 in the House of Commons.
I will make a brief slide presentation and take 10 minutes to go over the slides.
First, I will talk about the changes that have been made to the supplementary estimates process to better align it with the federal budget. I will then address certain aspects of the Supplementary Estimates (C) 2017-18. Third, we will briefly review the 2018-19 interim estimates. Lastly, I will outline the organizations that are appearing for the first time in an estimates exercise.
[English]
Turning to slide 4 of the presentation, a summary for the committee of proposals to improve and to reform the estimates process and to better align estimates documentation with the federal budget, the committee may recall that there was a working paper, a proposal prepared by the President of the Treasury Board in October 2016, and we spent some time with this committee and committees in the house to discuss options to bring better information to Parliament in the form of the estimates document. The proposals essentially were four pillars. They dealt with timing, the scope and accounting of our documents, the basis of parliamentary control, the vote structure, and reporting and information. On slide 4, we see these four pillars with an update of progress to date, where we’re going and what this means for Budget 2018.
The common feedback and complaint from parliamentarians and from other stakeholders was confusion that was created because of differing timing of the estimates process and the budget and confusion because of different accounting, different numbers in the budget and in the estimates. Through the first two pillars, to address timing and to reconcile scope and accounting, we have responded to those criticisms with specific proposals to make the documents more coherent.
Specifically, in June 2017, the House of Commons approved changes to their standing orders that will allow to us table the Main Estimates on or before April 16, that is to say, almost certainly after the budget. This year we know that the budget is today. We will be taking the budget decisions today, and we will have an opportunity to reflect those in the Main Estimates. We think that is a tremendous step forward in terms of coherence and transparency. That will also allow us to take the numbers in the budget, presented on an accrual basis, and do the reconciliation in the Main Estimates to put those into cash terms for parliamentarians.
Related to the reform agenda were interests on the part of parliamentarians about the basis of control. We do have a pilot at Transport Canada to take their grants and contributions program and to break that out according to the purpose of those programs. This year we look forward to evaluating that and working with parliamentarians to determine whether that pilot should possibly be expanded.
Finally, the committee will recall that, about this time last year, my colleagues and I presented TBS InfoBase, which is our online repository of all our data and information around program spending and personnel to support that program delivery. We have continued to make improvements to InfoBase to support the study of public finance.
Slide 5 is a busy slide, but it depicts the different documents and the sequence of the tabling of documents through the fiscal year. It’s a great coincidence that I’m here today, February 27, the day that the budget will be tabled. What we have done to start fiscal year 2018-19 is we have presented, for the first time, an interim estimates that will allow departments to begin the fiscal year. Later today, we’ll have the budget, and the president will be following up that budget by tabling the Main Estimates in the house on or before April 16. This will bring the budget plans into the estimates process.
[Translation]
Slide 6 of my presentation shows the various budget products we’re looking at and that describe our plans for 2018-19.
To start the year, we have the interim estimates, tabled on February 12 and providing information on the spending requirements over the first three months of fiscal year 2018-19. The amounts in the interim estimates will be the same as those set out in the first appropriation bill for the fiscal year, which will be introduced in Parliament by the end of March.
The Main Estimates will follow on April 16, and departmental plans will be tabled at the same time. The Main Estimates give an idea of the planned spending for the full year, while departmental plans identify the organization’s priorities and forecasted results.
[English]
Following approval of the Main Estimates and the related supply bill in June, we would expect to bring back to Parliament supplementary estimates documents that bring forward for Parliament’s approval those items that either weren’t in the budget or have subsequently been announced or approved by the government to support their clear mandate. For 2018-19, the first supplementary exercise will be next fall, which will be Supplementary Estimates (A), and then we will complete fiscal year 2018-19 with Supplementary Estimates (B) next February.
Turning to Supplementary Estimates (C) to conclude 2017-18, the first few pages of the document summarize the authorities presented in the estimates and then, as usual, the largest section of the document presents detail by department. You’ll note that we have tagged the individual items for each department according to the appropriate budget year, as applicable, and the table at the end of the document supports the proposed appropriation bill that will be introduced in Parliament later in March.
In addition to the tabled document, there is additional detail that is available online. This includes information on frozen allotments, that is to say, money that has previously been approved by Parliament but for which the department has identified that they no longer require access to that funding. We have frozen those amounts, and they will lapse in reference levels and be reported in the public accounts as unused authorities. Finally, I would remind the committee that the TBS InfoBase is also available to provide more information on authorities and expenditures.
As we see on slide 8 of the presentation, the Supplementary Estimates (C) provide information on $4 billion in voted budgetary appropriations for 48 organizations. The new funding supports many initiatives announced in Budget 2017, as well as as spending set out in prior budgets or announced subsequent to Budget 2017.
These estimates also provide an update on forecasted statutory spending. The $336-million decrease in statutory budgetary spending reflects revised forecasts for public debt charges and major transfers and the cost of employee benefits associated with initiatives funded in these estimates. It also includes a new payment to the Canada Infrastructure Bank that was created as a result of Budget Implementation Act 2017.
We’ll see on slide 10 the major initiatives in the Supplementary Estimates (C). We have defined major initiatives as anything with a value of $150 million or more. The 10 initiatives we see here on slide 10 total approximately $2.7 billion, which is slightly more than two thirds of the total voted amount of $4 billion in these estimates. These items include the Service Income Security Insurance Plan, funding to DND for their defence policy and military missions, pay list requirements, G-7, et cetera.
We have taken those 10 initiatives and grouped them according to theme on slide 11 of the presentation. We see on slide 11 that the $4 billion has been grouped into broad categories. Roughly 55 per cent of the spending falls into the three largest categories of wages and benefits of the public administration and the Canadian Forces, which is 25 per cent of the Supplementary Estimates (C); defence spending at $746 million, or almost 20 per cent; and climate change and the environment at $438.9 million, or 11 per cent.
[Translation]
I would now like to go back to fiscal 2018-19 and the first interim estimates. As you have seen, the interim estimates is a slim document providing details on planned spending by organization for the first three months of fiscal 2018-19. The proposed schedules to the appropriation bill correspond exactly to the first appropriation bill of the fiscal year.
I hope you will find this an improvement over previous years, when the first bill, the interim supply bill, contained only fractions of the amounts in the Main Estimates.
Through the interim estimates, we are presenting $30.9 billion in voted budgetary expenditures for 2018-19. There are no statutory expenditures in this document. They are listed as usual in the Main Estimates and the supplementary estimates from earlier this year.
[English]
Turning to slide 14, we put this year’s interim estimates of $30.9 billion in context of interim supply from the previous two fiscal years, so again this year, interim estimates of $30.9 billion. That compares to $30.1 billion for 2017-18 and $26.4 billion for 2016-17.
Mr. Chair, in concluding, I would simply call to the attention of the committee that there are three organizations appearing in estimates for the first time. In Supplementary Estimates (C), we introduce the Department of Indigenous Services Canada, which was created by a ministerial change announced by the Prime Minister in August 2017, as well as the Office of the Parliamentary Budget Officer, which came into being as a result of the Budget Implementation Act. In interim estimates, we reflect the creation of the Invest in Canada hub brought into being by the Invest in Canada Act.
[Translation]
Mr. Chair, I have concluded my presentation on these two documents tabled by the President of the Treasury Board on February 12. My colleagues and I will be happy to answer your questions.
[English]
Senator Marshall: Thank you for being here this morning. It’s nice to see you again.
I wanted to talk about the Phoenix system under your Supplementary Estimates (C), the $6.3 million. Can you tell me exactly what that is for? I’m asking because I was watching the committee proceedings in the House of Commons and there seemed to be confusion as to what that money is for, whether it’s for consultants or whatever. Can you tell me exactly what the $6.3 million is for?
Mr. Pagan: In fact, I would point out that this amount appearing in Treasury Board of $6.3 million is part of a larger initiative to support stabilization of Phoenix and the pay system. When two or more departments receive funding, we label this a horizontal initiative, and there will be detail on that at the introduction of the estimates. The two departments receiving funding are the Department of Public Works and Government Services, at $166.1 million, and the Treasury Board Secretariat, at $6.3 million.
PSPC is operating the system and they’re getting the bulk of the funding, and that’s related to adding capacity. They’re hiring compensation advisers for the centre in Miramichi, they’re doing system fixes and they’re working with the Treasury Board Secretariat on reforms of HR processes.
The Treasury Board Secretariat amount of $6.3 million is related to the HR transformation process. We’ve created a team in the secretariat that is working with departments and PSPC to look at the way in which the business processes influence the system. It also supports a claims office that has been established at the Treasury Board Secretariat. In those instances where public servants have been adversely affected by Phoenix and they’re incurring interest charges or accounting charges to resolve tax issues, they can submit claims for that and be reimbursed by the government.
Grace, do you have additional detail?
Grace Chenette, Executive Director, Financial Management Directorate, Treasury Board of Canada Secretariat: The only other thing to add, in terms of some of the key processes being reviewed now that could benefit from standardization of processes, are some of the transfers in and out of employees from departments — departures — so that is an example of some of the targeted practices or processes.
Senator Marshall: How much of the $6.3 million is for consultants?
Ms. Chenette: There is a total of about $1.1 million for consulting fees.
Senator Marshall: During the meeting in the House of Commons, there was a reference to a public tender or a public request for proposals. Can you bring us up to date on that? Is that part of the $6.3 million? What was the request for proposals for?
Mr. Pagan: I’m not familiar with the specific question in the house, senator. I believe — and I will confirm this for you — that the reference was to a request for proposals initiated by PSPC to obtain additional support on the system fixes.
Senator Marshall: That’s not part of the $6.3 million?
Mr. Pagan: It’s not part of the —
Senator Marshall: So it’s $6.3 million, and $1.1 million is for consultants, and $5.5 million is for in-house, for the human resource claims office. Okay. How much has Treasury Board spent so far on the Phoenix system? There is the $6.3 million here in your Supplementary Estimates (C). Phoenix has been on the go now for several years, so what is the cumulative for Treasury Board?
Mr. Pagan: For the Treasury Board Secretariat specifically? I would have to get that breakdown for you, senator. I don’t have the TBS component. The largest share obviously has been with PSPC. Marcia is reminding me they will be here later this morning.
Senator Marshall: That was my next question. Treasury Board is incurring expenditures, but so are other government departments. Who is keeping the overall tabulation of the costs? I had asked public works, the procurement people, when they were here last. They said they were working on it. Who has that information now?
Mr. Pagan: There was a report, as you may recall, by the Auditor General in the fall. There was a specific management response to that report to develop a complete costing of the Phoenix system. That effort is being led within TBS by the Office of the Comptroller General. I can’t speak to the specific timeline, but later this spring, the Comptroller General will present a full costing of the cost.
Senator Marshall: We would know sometime this spring, then? Before we recess for the summer, we should have that information?
Mr. Pagan: Yes.
Senator Marshall: Thank you.
Let’s talk about the Back Office Transformation Initiative. These are not material amounts when you look at the overall amount in Supplementary Estimates (C), but because money has been spent previously, the amounts are quite significant. Regarding the $3 million for the Back Office Transfer Formation Initiative, when is that going to be complete?
Ms. Chenette: That amount is going to contribute to amounts already collected this year from other departments to complete work in the FM, HR and information management processes. It is a long-term strategy that we’re approaching in phases. The phase that this funding will contribute to on the FM side was to develop the user requirements and start the build of the FM system. With the HR, it was about improving the functionality in the HR system, and it also contributes to an interoperability function that would allow information to move from FM to HR.
Senator Marshall: How much money has been spent on that project? I know in previous Treasury Board estimates, we have seen large amounts, for example, $25 million and $11 million. How much has been spent to date on the Back Office Transformation Initiative?
Ms. Chenette: I have $110.6 million that’s been spent over the past three years.
Senator Marshall: How much more before it’s finished — or will it be finished?
Ms. Chenette: For the FM system, by the time we’re completed this year, we will have built 40 per cent of the system. We need one more year to complete the full system, at which point you can then decide to stop and you’ll at least have a system that departments can onboard.
Senator Marshall: You said 40 per cent so far, so $110 million?
Ms. Chenette: The plan for next year is being finalized to determine how much it will cost to finish this.
Senator Marshall: So the overall initiative would be about a quarter of a billion dollars; is that right?
Ms. Chenette: We’re at $110 million right now.
Senator Marshall: That’s 40 per cent?
Ms. Chenette: No. This year, the 3.23 has contributed to an overall collection of $38 million. In this fiscal year, various things have been going on. Part of the financial management stream of work has been to start the build of the system.
Senator Marshall: Okay, so what is the total projected cost of the initiative? I’m trying to get a handle on it. The issue I have is that with Phoenix, back office transformation and these other projects, because they occur over a number of years, we really don’t get a good feel as to exactly what they are costing. So if you see an amount of $3 million for back office transformation, then you think, okay, that looks like a mini project. But it’s not. It’s a major project. I’m trying to get a handle on it. That initiative is going to cost government how much in total?
Mr. Pagan: Senator, what you have identified here is a very important point that speaks to some of the challenges we have had historically with the estimates process in general, and the broader issue of an incremental approach, a budget and then individual supplementary estimates. On your specific question about the total costs spent versus projected, we’ll come back with a written answer that question. I think the broader point here is a call to present information in a broader context. That’s something that I’ll take back to the president. We look forward to engaging with parliamentarians about additional reforms to the way in which we’re sending information to provide that detail.
Senator Marshall: I would like to get information on the overall costs of some of these projects, because it seems like it’s coming out in dribs — that’s probably not the right word, but it is coming out in small amounts. So every time we get sups or the estimates, there is a little more money in it. I would like to stand back and see exactly how much. Is it worth the money? If we’re putting a quarter of a billion dollars into something, was it worth a quarter of a billion dollars? It’s not just Treasury Board funding it. Other departments are also spending money. I would like to see the big picture.
That brings me to my third point. I spent quite a bit of time looking for information using InfoBase, just going through the government website. I find that the information is still limited. The information might be there at a high level, but when you try to drill down, it’s very hard to get the details. I’ll give you an example, namely, the service income security insurance plan, the $622 million. It was really hard to find information on that. I compliment you on the InfoBase where you’re starting to provide information. However, I would like to see more detailed information. Is there something in store that would provide us with more? I would like to see the details.
Mr. Pagan: Well, thank you. There are two parts to my response. First, in terms of providing a more complete picture, in my response to you on Phoenix, I pointed out this is a horizontal initiative. We have heard previously from committees that they want to understand how departments are working together, so we have made a point of highlighting that at the front end of every document, and there is a related website, a horizontal initiative database, where we can provide more detail on these horizontal initiatives.
In terms of your particular question on SISIP and being able to get specific program information, this is part of the president’s discussion paper, namely, proposals on potential areas of reform. We know of the pilot at Transport Canada where they are doing a purpose-based approach, so we have put on the table the question about whether Parliament wants to continue to vote money by input, by operating capital and grant contributions, or by purpose, that is, the raison d’être of a department and the specific programs.
There are all kinds of models. We could potentially tie ourselves in knots by having project-specific funding and have tens of thousands of individual votes, or we can find an aggregation where there is some balance between clear purpose and the flexibility that departments need. The president’s proposal was to introduce what he was referring to as purpose-based votes. Again, I have spoken to this.
At the Treasury Board Secretariat right now, we have an operating budget of approximately $300 million. That $300 million is what funds back office, our Phoenix contribution, our admin policy, our role as employer, my function as expenditure manager and our responsibility for regulatory affairs; it’s all in.
In a purpose-based approach, we now have a construct where we have four core responsibilities; employer, expenditure authority, administration policy and regulatory authority. The idea was that we might take that $300 million vote and disaggregate it by those purposes with clear programs under each purpose. For example, the back office transformation would be an initiative under our role as admin policy. Phoenix would be a program under our role as employer. This is something that we remain interested in assessing, but there are no specific proposals or decisions on how to perform at this time.
The Chair: Mr. Pagan, please provide the answers to the questions from Senator Marshall to the clerk as soon as possible.
Mr. Pagan: Yes.
Senator Pratte: Thank you for being here and for buying season tickets to this committee. I hear season tickets for the Canadiens game next year will be less expensive.
I want to understand, in the interim estimates 2018-19 this year, how the departments came up with their numbers compared to what they did in previous years with the interim supplies? Was it a very different process or very similar?
Mr. Pagan: It was a very similar process, senator.
In the previous model, we would develop the Main Estimates, and it would total $200 billion and some, and the starting point was we would provide a fraction, three twelfths, for April, May and June to begin the fiscal year, and if departments had upfront expenditures, if they were making grant payments on April 1, we would increase the increments available. So we’ve followed that same process.
The key difference, though, is that in years past, the Main Estimates starting point, because it was before the budget, sometimes included perceived reductions in expenditure because funding had not been renewed in the budget. I’ve used the example of Marine Atlantic where funding that was coming in the budget had not yet been announced, and so their Main Estimate starting point was quite a bit lower than normal.
This year, because of our interim approach, we have simply taken as a starting point existing authorities to end 2017-18, and then departments have used their fractions based on their existing authorities, not on any sort of perceived reaction, but the actual calculation of the interim amount is very similar to years past.
Senator Pratte: Thank you very much.
I want to discuss the $623 million to address shortfalls under the Service Income Security Insurance Plan. There was a shortfall in the fund that is used to pay for these claims. I suppose there are actuary estimates regularly on this fund. Is there any vision of the future? I understand this amount covers the shortfall, so when the surplus falls below 40 per cent of annual premiums, does the $622 million bring it back to 40 per cent below? Is that it? Or does it bring it to zero? What does it do?
Ms. Chenette: The $622.9 million will get the plan out of its deficit plus build up the reserve, which is 40 per cent of the premium.
Senator Pratte: Okay. What is the vision for the future then? Is it expected that claims will continue to be over what is expected?
Ms. Chenette: The plan is reviewed every three years and an actuarial assessment will be done. There has been an increase in claims over the past few years, so it is the matter of building in a certain percentage increase going forward so that we can keep the plan in a healthy, sustainable place.
Senator Pratte: What does that amount represent for the whole plan? Obviously it’s probably quite a huge plan.
Ms. Chenette: The $623 million brings the total vote 20 to $3.2 billion. That is the whole vote 20 public insurance plans.
Senator Pratte: Is this the first time there is a shortfall? I guess not.
Ms. Chenette: No. Because it’s every three years, the last time was in about 2015 where we came looking for a top-up for the shortfall, and then we will come annually even to get an increase in the premiums that are required to sustain the plan at a certain level.
Senator Pratte: The reasons being the same?
Ms. Chenette: The cost drivers are that the number of claims has gone up. The amount of the claims has also increased, and there are extra-low interest rates that make the investment income low. We tend to be able to look at vote 20 increasing the reference level on an annual basis, so that also explains why we’re here annually.
Senator Pratte: Thank you very much.
Senator Eaton: Did I joyfully understand you when you said that on the vote structure, on the third pillar, that programs will be evaluated? I ask that question because I remember a couple of years ago I didn’t ask you, but I asked the Fisheries people. They’d spent $40 million on teaching West Coast First Nation people to fish. I asked them, how many people did you teach to fish and how many people are fishing and did you buy boats? That’s just a crude example, but they couldn’t tell me. They didn’t have any data on the program. In this new way of presenting the budget — and I congratulate you because I think it will be much better for us all — will you have some program evaluations or data so that if you’re asked questions like that again, you’ll be able to say, yes, our program taught X number of people to fish or we bought X or this is what is going to happen?
Mr. Pagan: Thank you, senator. I have a two-part response to that question. First of all, program evaluation in the public service has existed for many years, but there has been a recent change in terms of how we are approaching that with the idea of making it more evidence-based and data-rich to inform decision-making.
Senator Eaton: User-friendly for all of us.
Mr. Pagan: Yes. You will see a manifestation of that, and it’s not perfection yet but we certainly aspire to continue progress, in the most recent iteration of InfoBase where we have added specific data points on program expenditures.
Now, I don’t have Fisheries or any other department in my head.
Senator Eaton: I used that as an example to illustrate what I meant about program evaluation.
Mr. Pagan: Under the TB policy on results that has given us now the core responsibilities that I spoke to in terms of TBS context, each department in their 2018-19 Main Estimates is going to be presenting their spending according to these broad pillars, core responsibilities. Underlying that are the results that they expect to achieve in their areas of responsibility, in the specific programs that support their responsibilities.
The fact that we will be tabling the Main Estimates and the departmental plans on the same day for the first time is by design, because the departmental plan is intended to inform your study of the Main Estimates. The Main Estimates will be two or three pages for each department, and the departmental plan will be an additional 30 or 40 pages of detail that sets out the specific targets. So how many stakeholders do you intend to reach or what level of service do you intend to provide?
In terms of the results, we have some of that information now on InfoBase, and departments will be providing more detail in their departmental results reports that are tabled in the fall when the public accounts are completed.
Evaluation is the way of ensuring credibility of those results. It’s a way of verifying that we’re actually being efficient and effective in setting out that program target and some confidence that the results reported are actually being achieved and, if they’re not achieved, that there are remedies in place to help the department get there.
Senator Eaton: At the end of the year, when they want top-ups, would they be able to show us, yes, they’ve reached the target, or they’re 3 per cent under or 10 per cent over the target, and this is why they need more funds? Do you think they’ll be able to do that, or will the timeline be too short?
Mr. Pagan: That is certainly the design, the theory. We’ve seen some manifestation of that in recent years. There were reviews of spending at Fisheries and Oceans and Transport Canada in 2016-17. Based on those reviews and the evidence and information put on the table by the departments, the government made the decision to make certain investments in areas because there was a historical timeline that showed a gap between the commitment or the mandate and the ability to achieve certain results. So that’s the way in which we use both evaluation information and results reporting from departments to inform departmental progress.
We also look at things like overhead and internal services and whether departments have the right mix of inputs. They might be under-resourced in the regions or top-heavy in Ottawa, et cetera. That’s all part of the analysis and assessment that we do when we’re making funding decisions.
Senator Eaton: Thank you for that answer. It will be very interesting for us in our future meetings to see how that’s going.
Among the major items in Supplementary Estimates (C), there is $435 million to DND for initiatives under the new National Defence policy, and it goes on to say:
. . . defence engagement program expansion, health and wellness strategy, in-service support and operating funding for Strong, Secure, Engaged initiatives.
Could you tell me what that means?
Mr. Pagan: It is, in some ways, related to the question from Senator Pratte about the back end of Defence spending and support to veterans as they leave the forces.
In the new results framework, DND has identified six core responsibilities, one of which is, essentially, the Defence family, ensuring that members are properly trained and developed during their careers, and that the families and personnel have the proper support as members are sent off on missions, et cetera.
With this funding, part of what they’re getting through the Defence policy are investments in training and in personnel and well-being support, family support and counselling.
Senator Eaton: In the new way of doing things, that will all be itemized: this for training at Trenton, this for veterans, this for that?
Mr. Pagan: We have tagged in the Supplementary Estimates (C) the specific amount for the department. It is currently presented as part of their aggregated vote. So, again, we don’t have a decision on whether to proceed with some alternative to the current vote structure, but we will continue to use the written information here in the estimates documents and InfoBase to provide a more programmatic view of spending.
[Translation]
Senator Forest: Thank you for your very interesting presentation. With regard to this new approach to the budget exercise, the interim estimates, does the president provide specific objectives, directives or expectations to all departments for the preparation of their estimates? For example, this year, I see an increase of 2.7 per cent in non-statutory spending over the last budget. Are there targets given to the various departments for the preparation of their estimates?
Mr. Pagan: Thank you, Senator Forest. We don’t set targets as such. The current process is obviously a bit complicated, given the Department of Finance’s work on the budget and our work on expenditure management with all departments. The Main Estimates present the maximum authorities available to the departments for delivering programs and services in accordance with their mandates and government priorities. Those are then the maximum targets. There are mechanisms to occasionally study a department’s expenditures in greater detail and, from time to time, to decide whether to reduce expenditures or make adjustments in a program or service. However, it’s not as simple as telling each department at the beginning of the year to identify a certain percentage to make cuts, and so on. There are the authorities available and a maximum, and then it’s up to the department to manage its mandate and its authorities.
Senator Forest: You establish an envelope, a maximum ceiling, and the department has to work within that.
Mr. Pagan: That’s right.
Senator Forest: No targets then, say, at 1.7 or 1.8.
Mr. Pagan: No.
Senator Forest: There is something that really surprises me, given the current government’s strategy and commitment in the last campaign to invest heavily in infrastructure with a plan of over $100 billion. A portion of those investments is made in partnership with the territories, the provinces and the municipalities, but surprisingly there is also a large part that comes from government agencies and departments as such.
Take for example Fisheries and Oceans Canada, and I’m trying to look at that because those are one-time votes that will not be renewed on an ongoing basis, since that’s a specific program. Last year, much of the capital funds were not used by Fisheries and Oceans Canada. I’m trying to discern the pace of investment this year and I can’t do it. Do you follow up on the one-time funding granted to agencies and departments for the specific infrastructure programs and infrastructure plan that the government has put in place? Or is it incorporated in the bulk of the government’s capital expenditure budgets?
Mr. Pagan: Thank you, Senator Forest. There are two parts to your question. The huge investments you mentioned are managed by the departments responsible for infrastructure, and that program works along the lines of transfers and grants to the provinces and municipalities. There is a whole process for tracking those amounts. With regard to infrastructure investments for departments, there were two important initiatives recently. In Budget 2015, I think, there was a federal infrastructure investment program. The exact amount escapes me, but I can check on that. It was $4 billion or $5 billion. Those numbers rose in Budget 2016. I can follow up in writing to check on the figures, but it is up to each department to track those amounts in its departmental plan and its performance reports to identify the exact amounts and the actual amount spent.
Senator Forest: Basically, I am asking the question. Take Transport Canada, which is responsible for several port facilities across Canada. Are there specific votes that have been allocated for these projects? If so, what are these votes? How are we doing in terms of investments? This is the essential tool that the current government has adopted in its mandate to revitalize the economy. It is not easy to follow the pace of investments. There are, of course, all the infrastructure programs with the provinces and territories, that’s one thing, but within our own departments it is not easy to see what is specifically allocated.
If I look at Fisheries and Oceans, for example, some funding has been invested, but how many of those votes come from this special envelope? I’m just not able to see it. Perhaps I should ask my colleague Senator Marshall to explain it to me.
Mr. Pagan: I will consider that question. You are quite right. Your question is related to Senator Marshall’s. We need a more global context when it comes to programs. Because of the way it is presented in these documents, the information focuses on this year. You have to look at the increments, not necessarily the total. I will follow up with the president to see if there is a better way to present the information in a broader context.
Senator Bellemare: I have a question for you regarding the changes you have made. You may have already talked about it.
Will the new process change the architecture of the programs in the various departments? As parliamentarians, we often ask ourselves the same question. When we have a private member’s bill, the bill does not need ministerial approval or royal assent. In many cases, ministers can re-allocate program funding without changing the program’s architecture. Will the new way of doing things have an impact on the departments’ program architecture? Also, will the possibility of transferring funds from one budget to another be affected? Will approval be required from the Treasury Board Secretariat or under the supplementary estimates? In other words, will that affect private members’ bills?
Mr. Pagan: The short answer is no. At this time, there is no change in the architecture of the control points. There are votes for operations, capital, grants and transfers. The president put forward an idea about adopting a better approach to presenting information. There is a pillar that focuses on the control mechanisms we are talking about.
[English]
They are described as purpose-based votes.
[Translation]
The idea is to examine the usefulness of modifying the process to vote money on the basis of the program’s purpose and not necessarily on the basis of the inputs.
[English]
Salaries, consulting and training.
Senator, thank you for the question. There has been a theme through this session to provide information in a more global context. I think we’ve made a good deal of progress in explaining the increments, but we’re missing the forest from the trees, so that’s something that we will take back in discussions with our president’s office.
In terms of the way in which we control allocations, it does require a balance of understanding what the purpose is and what the money is being used for with a little flexibility to be able to account for slippages in contracts and delays in hiring staff and this sort of thing. There is a specific proposal from the president to consider an alternative architecture, and that is something that we remain interested in. It would certainly support the policy on results and the core responsibilities that you will see in the estimates at this time.
The simple fact is we spent so much time last year just explaining and examining the implications of timing that all of the attention and all of the efforts in the house were on changing Standing Order 81 to allow us to change the Main Estimates timing to April. So we’ve done that, and I think Parliament will hopefully be pleased with the information that’s provided this year in the estimates and how that aligns with the budget. If that meets with their pleasure and we can move past timing and on to the other pillars, investments reform, that is something we remain interested in.
[Translation]
Senator Bellemare: I would like to ask a supplementary about the old reports on plans and priorities. Will we be able to follow up or will it be completely different?
Mr. Pagan: Those documents are still available online. This year the departmental plan’s new format will be reconciled with the old format. You will be able to find all the information there.
[English]
The Chair: Honourable senators, we will conclude with a question from Senator Andreychuk, and then we will move to the second panel.
Senator Andreychuk: I’m new. I’m not Senator Marshall, who knows the ins and outs of this process. I’m learning. I find a lot of things hard to track because of some of the verbiage, like “frozen allotments.” Why do we have them, why are they there, and why is it less now? Is it mismanagement or proper management? What has led to frozen allotments? We approve it, and then government determines later they’re not going to use it when they’ve requested it?
Mr. Pagan: We’ve been presenting frozen allotments in the final supplementary estimates for the third year now, and this is modelled on practice elsewhere, which we consider to be best practice.
The way the process works is when Parliament provides an appropriation, that’s the maximum authority available. Departments, as a matter of business, will make sure that they are anticipating any eventuality so they have the funds available. That is often more than what is required, so where that becomes evident, we will freeze the money so that money can’t be used for anything else. So it speaks to Senator Bellemare’s question about money sloshing around.
There are lots of reasons why funds won’t get spent. There can be delays negotiating agreements with the provinces. We have seen that on infrastructure. There can be delays in major military procurement or in hiring staff. When money has been allocated for a specific purpose and it’s evident that money won’t be used for that purpose, frozen allotments are a tool that can be used by the executive. It’s not automatic, but it can be used by the executive to make sure that money remains frozen, is not available for anything else and will lapse. We consider that to be good, prudent management of public funds so that the money is only used for the purpose intended.
That contributes to another dynamic, a terminology that may not be familiar to you, and that is re-profiling funds. The way in which we work is we provide authorities for a fiscal year. For example, DND will get money in this year to do this, but if they can’t do this project, we may freeze the money and then we will work with Finance to re-profile it. It could be next year. It could be four years out. Then we will bring that money into the estimates process in that year so it’s available at that time.
Your question is certainly appropriate. It speaks to our ongoing effort to render the process more transparent. If money is voted but isn’t being used, we’re making that clear, and it advances the idea of program-based spending that money is only available for defined purposes.
Senator Andreychuk: It would also be helpful to find out why the government freezes and change perspectives. It would be enlightening to know why. That’s a policy question as well as a numbers question.
The Chair: Mr. Pagan and witnesses from Treasury Board Secretariat, the main objective of this committee has always been about accountability, transparency and predictability. In your presentation, you noted and had some questions on the pilot project having purpose-based votes, and you are also in the process of determining if parliamentarians would like to expand upon the project. I would like to say that the purpose-based votes are clearer, and we would like you to expand the project on the basis of the objective as reported in the Senate Chamber. We are mindful of accountability, transparency and predictability.
Thank you very much, Mr. Pagan. We may call you back as we go forward. Thank you for sharing this information.
[Translation]
Resuming proceedings. We now welcome three departments.
[English]
Colleagues, we have only one hour for this panel.
We are pleased to welcome, from Indigenous Services, Paul Thoppil, Chief Financial, Results and Delivery Officer, Chief Finances Results and Delivery Officer Sector.
[Translation]
We also have Catherine Blanchard, Director General, Planning and Resource Management.
[English]
From Employment and Social Development Canada, we have Mark Perlman, Chief Financial Officer, and Jason Won, Deputy Chief Financial Officer.
From Public Services and Procurement Canada, we welcome again Les Linklater, Associate Deputy Minister, and Marty Muldoon, Chief Financial Officer, Finance and Administration Branch.
Thank you for being here and sharing your comments with us. I have been informed that you each have introductory notes. We will start with Mr. Thoppil, to be followed by Mr. Perlman and then Mr. Linklater.
[Translation]
Mr. Thoppil, you have the floor.
Paul Thoppil, Chief Financial, Results and Delivery Officer, Chief Finances Results and Delivery Officer Sector, Indigenous Services Canada: Thank you, Mr. Chair and honourable senators, for the invitation to discuss the Supplementary Estimates (C) for the fiscal year ending March 31, 2018 for Indigenous Services Canada.
[English]
This is the first supplementary estimates ever for Indigenous Services Canada. As you know, the Prime Minister announced the dissolution of Indigenous and Northern Affairs Canada in August 2017 and the creation of two new departments designed to better meet the needs of the people they serve, to accelerate self-determination and the closing of socio-economic gaps and, ultimately, to advance reconciliation.
[Translation]
Indigenous Services Canada will improve access to high-quality services for First Nations, Inuit and Métis; support and empower indigenous peoples to control the delivery of those services; and improve the socioeconomic conditions and quality of life in their communities.
[English]
When Crown-Indigenous relations and Northern affairs is created at a later date, that department will advance nation-to-nation Inuit-Crown, government-to-government relationships. They will support Indigenous peoples’ vision of self-determination and lead the Government of Canada’s work in the North.
[Translation]
The creation of these two new departments is a giant step forward in making the national journey of reconciliation a reality.
I would like to draw the committee members’ attention to a presentation I tabled entitled 2017-2018 Supplementary Estimates (C).
[English]
On slide 2 of my presentation, you can see that Supplementary Estimates (C) includes initiatives totalling $359.6 million to address the needs of Indigenous peoples.
With respect to financial highlights, slide three shows that the increase of $359.6 million is comprised primarily of $73.9 million to reimburse emergency management service providers for response and recovery activities on-reserve; $67.3 million for non-insured health benefits for First Nations and Inuit; $50 million for Budget 2017 investments in Indspire and the post-secondary student support program/university and college entrance preparation program; $33 million for First Nation Child and Family Services; and $30.1 million for the Pikangikum First Nation grid connection project.
Slide 3 provides a display in terms of voted expenditures. About $105.9 million will flow through vote 3, operating expenditures for non-insured health benefits for First Nations and Inuit, the Indian Residential Schools resolution health support program and transfers related to the creation of the department of Indigenous Services Canada, and; $253.7 million will flow through vote 13, grants and contributions, primarily to reimburse emergency management service providers, and for Indspire and the post-secondary students support program for First Nation Child and Family Services and the Pikangikum First Nation grid connection project. You will also note that $1 is included in vote 7, capital. This is simply used as a mechanism to create the vote for the new department.
[Translation]
I will now briefly describe the major items included in the Supplementary Estimates (C).
[English]
On slides 4 and 5, the largest item in these supplementary estimates, $73.9 million, will support emergency management response and recovery activities on-reserve. This funding will reimburse First Nations and emergency management service providers for on-reserve response and recovery expenditures occurred this year, such as the B.C. wildfires and the spring flooding that occurred in five provinces.
On slide 6, the second-largest item is $67.3 million for the non-insured health benefits for First Nations and Inuit. This funding is to continue to provide supplementary health benefits such as prescription and over-the-counter medications, dental care, vision care, medical supplies and equipment, mental health counselling and medical transportation to eligible First Nations and Inuit.
In 2017-18, this program is anticipated to grow by 8.9 per cent. This growth rate is driven by an increase in the client population served, increased demand for benefits and the cost increase of goods and services covered by the program.
The third item on slide 7 is for $50 million to fund the expansion of the post-secondary student support program, as well as Indspire scholarship and bursaries.
[Translation]
The fourth item explained on slide 8 will provide $33 million to First Nation Child and Family Services to help address this program’s financial pressures in the maintenance stream stemming from changes in provincial legislation, regulations, rates and standards.
[English]
Slide 9, for $30.1 million, is related to the Pikangikum project, the First Nation grid connection project. This project entails the construction of a transmission line and associated infrastructure from Red Lake, Ontario, to the local distribution system at Pikangikum First Nation, therefore connecting 2,800 residents to the grid.
[Translation]
Finally, the last few slides, 10 to 12, provide information pertaining to additional key initiatives, including their objectives, outcomes and status.
Mr. Chair, these supplementary estimates will enable us to keep taking concrete steps to address the needs of Indigenous peoples.
[English]
Catherine and I look forward to discussing any aspects of the supplementary estimates with you and welcome your questions regarding my presentation.
[Translation]
Mark Perlman, Chief Financial Officer, Employment and Social Development Canada: Good morning, Mr. Chair, ladies and gentlemen of the committee.
[English]
I’m pleased to appear before you in my capacity as Chief Financial Officer for Employment and Social Development Canada, ESDC —
[Translation]
—that’s EDSC in French. Senior executives from key areas of ESDC are also in attendance and may be coming forward to help me answer some of your questions.
ESDC 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 a mandate to maintain a strong, productive, healthy and competitive workplace within the federal jurisdiction through the Labour program.
Service Canada delivers ESDC’s programs and other Government of Canada programs and services to citizens.
[English]
Allow me to present to the committee an overview of ESDC’s portion of the 2017-18 Supplementary Estimates (C) tabled on February 12, 2018.
Supplementary estimates are tabled in the House of Commons by the president of the Treasury Board to obtain the authority of Parliament to adjust expenditure plans as reflected in the estimates for the fiscal year. Supplementary estimates present information on spending requirements that were either not ready in time for inclusion in the Main Estimates or have subsequently been updated over the course of the year to account for developments in particular programs and services.
As part of Supplementary Estimates (C), ESDC is seeking $217.6 million in voted appropriations. This includes $203.5 million related to the write-off of debts owed to the Crown for unrecoverable Canada student loans. As general practice, a separate vote is established for authority to write off debts. A loan to an outside body is considered a non-budgetary item since the loan is expected to be repaid. Student loans are an asset for the Government of Canada and such write-offs become a charge against appropriation and therefore require Parliament’s approval.
The Canada Student Loans Program, CSLP, provides approximately $2.7 billion in student loans each year. The program helps students in financial need access post-secondary education while ensuring accountability for taxpayers’ money. The government is assisting Canadians in managing debt loads through the Repayment Assistance Plan, or the RAP. For borrowers experiencing difficulty repaying, the government’s RAP provides relief by paying interest or reducing loan principle, therefore reducing future write-offs. The CSLP write-off of $203.5 million in 2017-18 is for student debts for which all reasonable collection efforts have been exhausted.
According to the debt write-off regulations, debts should be written off in the year in which they are determined to be uncollectible. The debt write-off regulations contain criteria under which accounts may be submitted for write-off. The main criteria is that they are statute barred.
The Canada Student Financial Assistance Act establishes a limitation period of six years between the time the borrower last acknowledged their Canada student loan and legal activity the Crown can undertake to recruit that debt. Other reasons for debt write-off include bankruptcy, extreme financial hardship and compromised settlements. The request is consistent with such regulations as it has been determined that these debts are uncollectible.
[Translation]
Under vote 5, grants and contributions, $25 million is requested to support post-secondary education and skills training in the province of Quebec. Included in the March 2017 health care agreement with Quebec was a commitment to make a one-time $25 million payment to support post-secondary education and skills training. As stated in the Quebec provincial budget released March 28, 2017, the province will use this funding to train specialized nurse practitioners to improve the delivery of health services. This is built on the Government of Canada’s Budget 2017 investment of o$6 billion over 10 years for home care and $5 billion over 10 years to support mental health initiatives.
[English]
ESDC is also requesting three transfers between departments under vote 5. One is a transfer support an in-year reallocation of youth funding to other departments of $10.7 million. Each year, the department is authorized to make necessary in-year adjustments to the resource allocations of the 11 participating departments and agencies with the objective of fully expending the Youth Employment Strategy funding envelope. This year, the following departments requested additional funds: the National Research Council for $10 million; the Canadian Mortgage and Housing Corporation, $674,584; and the Department of Natural Resources, $36,500.
Under vote 1, there is a transfer to Foreign Affairs, Trade and Development of $110,855 to provide support to departmental staff located at missions abroad and a transfer of $22,804 to the Canadian Institutes of Health Research to support analysis of the national data collected by the Canadian Longitudinal Study on Aging.
[Translation]
Additionally, through these supplementary estimates, we provide Parliament with an update on our statutory programs. Statutory items are included in the Estimates for information only, since Parliament has already approved the purpose of the expenditures and the terms and conditions under which they may be made through other legislation.
[English]
You will note that the budgetary statutory items forecast increased by $59 million. This is mainly due to Canada student grants, a $123.8 million increase, as a result of changes following the announcements made in Budget 2016 that introduced a fixed student contribution to determine eligibility for grants. This measure has been in place since August 1, 2017. This increase is mainly offset by decreases to the Old Age Security and Guaranteed Income Supplement as a result of changes to the forecasted average monthly rate, the estimated number of beneficiaries and the estimated amount recovered from higher-income seniors through the Old Age Security recovery tax.
Finally, there is a net increase of $210.5 million for the non-budgetary statutory items, which includes the Canada Student Loans and the Canada apprentice loan. This is mainly due to the fact that Budget 2016 introduced a fixed student contribution to determine eligibility for loans, making post secondary education more affordable for students from low- and middle-income families. This measure has been in place since August 1, 2017.
[Translation]
I hope this overview has given you a better understanding of the Supplementary Estimates (C) for our department.
[English]
My colleagues and I would be pleased to answer your questions.
The Chair: Before I ask you to make your comments, on behalf of the committee and as chair of the committee, I want to thank you, Associate Deputy Minister Linklater, for your help in assisting us in visiting the Miramichi Pay Centre on May 7. We are looking forward to it.
Please make your presentation.
Les Linklater, Associate Deputy Minister, Public Services and Procurement Canada: Thank you for the opportunity to appear before you to discuss the 2017-18 Supplementary Estimates (C) for Public Services and Procurement Canada. Joining me today is Marty Muldoon, our Chief Financial Officer.
As committee members know, PSPC plays an important role in the daily operations of the Government of Canada, delivering high quality client-focused services to other federal departments and Canadians. These services include federal office accommodation, procurement, translation, industrial security screening and care of the buildings in the parliamentary precinct.
[Translation]
Under these Supplementary Estimates (C), PSPC is seeking an additional $228 million. Of this amount, $152 million is for enhanced measures to help stabilize the Phoenix pay system and Miramichi Pay Centre service delivery.
Much of this funding is directed towards increasing capacity in the pay centre and our satellite offices across the country. We have more than doubled the number of compensation advisors. We will soon have 100 people at our Client Contact Centre who will be able to respond directly and provide more detailed information to employees who have pay problems. We are also looking at how work is organized so that transactions can be handled more efficiently. For instance, at the pay centre, we’ve piloted a new approach that organizes compensation experts and support staff into pods that specialize in specific departments or transaction types. Early results are promising.
[English]
Mr. Chair, we are pleased to be able to welcome you and your fellow members of the committee to Miramichi this spring. You will have an opportunity to meet the employees who are working extremely hard to ensure their public service colleagues are paid accurately and on time.
Supplementary funding is also to allow us to invest in technology and improve our systems and processes, with a particular focus on better connecting Phoenix to the patchwork of over 30 government human resource systems. Fixing Phoenix and ending the hardships it imposes on public servants across government remains the department’s number one priority. As you may recall from my recent appearance, we announced a full suite of measures this past November that are designed to bring the pay system to a point of stability in the short term reducing wait types and late transactions for missing pay. There is no quick solution to this situation, but this funding allows us to continue progressing toward the stabilization of the pay system.
Also, we continue to engage closely with the unions. As part of these supplementary estimates, $14 million is being requested to issue advances to the unions for pending dues.
[Translation]
In other areas of our mandate, $12 million is being requested for the provision of support services for this year’s G7 Summit in Charlevoix and related events. This will allow us to deliver on our mandate to support a federal organization in the planning, organization and delivery of the event. Specifically, services will include accommodation, event management, procurement, interpretation and project management support.
The amount of $7.9 million is directed to pension administration, which will help us deliver better service to pensioners. Funding of $7.3 million will help ensure that parliamentarians and Canadians continue to be served in the official language of their choice. The disposal of several surplus properties in Quebec and Ontario will yield $3.6 million, which is to be reinvested in the maintenance of federal buildings. A total of $2.7 million will go toward our efforts to improve our contracting processes, provide clarity to businesses, and ensure that federal procurement remains fair and transparent. This is part of our commitment to make it easier to do business with government.
[English]
The Government of Canada communications policy recommends that departments adopt a digital first approach to reach Canadians while continuing to use multiple communications challenges to meet the diverse information needs of the public. To better align ourselves with the Government of Canada’s digital first approach, we are seeking $2.5 million through these estimates, which will help us continue to support online advertising by the government.
Finally, $1.1 million will allow to us undertake the project definition phase of the West Memorial Building rehabilitation project. The building, which is currently unused, will become an accessible and modern workplace that meets today’s health, safety and environment standards. In the interim, the West Memorial Building will become the temporary home of the Supreme Court, whose building is slated to undergo its own multi-year rehabilitation beginning in 2023.
As PSPC generates $3.6 billion in revenues from client departments, this results in a net appropriation of $4.07 billion.
Mr. Chair, the department’s vision is to excel in government operations, and its strategic outcome and mission is to deliver high quality, central programs and services that ensure sound stewardship on behalf of Canadians and meet the program needs of federal institutions. PSPC’s hard-working employees at the pay centre in Miramichi and across the country are dedicated to realizing this vision.
We look forward to responding to the committee’s questions.
The Chair: Honourable senators, with a full slate of senators wanting to ask questions, I would like us to be mindful of the time frame. I would appreciate if we could have your full cooperation in keeping questions and responses succinct so that all senators can participate.
Senator Marshall: My question is for Mr. Thoppil, and it’s regarding the Post-Secondary Student Support Program and the $50 million. We’re at the end of the fiscal year. What will the department do with the $50 million? Is that going to be re-profiled, or what is the plan for the $50 million?
Mr. Thoppil: In anticipation of parliamentary approval, we already commenced an application process in advance with First Nation communities across the country. We have gone through an application review, and we are spending that money this year.
Senator Marshall: How many additional students will you be able to fund with the $50 million? I was looking on your website, trying to find some information as to what number of students is funded right now and how many incremental students can be funded with the $50 million. Can you give us some numbers?
Mr. Thoppil: I’ve tried to do that on slide 7 of the presentation, senator, by indicating that we expect that these Budget 2017 investments are supposed to support over 4,500 students. That’s just our portion of the overall $50 million, and there are two components to the $50 million. One component is our department’s own program of post-secondary support for student programming, which is a call for applications to First Nation communities and Inuit, and then there is also a small amount for Indspire. For the amount that goes to Indspire, Indspire will need to seek private sector contributions for matching purposes. So we have estimated, together with Indspire, that once they get the matching element to ours, it will add 7,500 students for scholarships and bursaries as well.
Senator Marshall: That’s in addition to the 4,500?
Mr. Thoppil: That’s correct.
Senator Marshall: How many students avail of the existing programs?
Mr. Thoppil: This is our program for post-secondary.
Senator Marshall: That’s it, is it?
Mr. Thoppil: That’s it. And it’s tremendously oversubscribed. Even at the present levels from Budget 2017, we are not able to support the demand from First Nation and Inuit communities.
Senator Marshall: I was thinking this was incremental to some already existing program funding, because students come and visit senators each year, and one of the issues they always raise is that there’s insufficient funding for Indigenous students and that there’s always a wait-list. Could you give us some idea of the wait-list? What are the numbers on the wait-list?
Mr. Thoppil: It’s very hard for us to estimate demand. It’s not based on a wait-list per se but on the information that would come from the calls for proposals and what we are not able to fund. Senator, what I could do for you as a take-away is to try to give you our estimate of demand, if that’s okay.
Senator Marshall: I would be interested in that.
And could you also take a look at your website, because on your target, you’re looking for an incremental increase year after year for the post-secondary Indigenous students, and it would be really informative if there were some numbers on your website.
Mr. Thoppil: Okay.
Senator Pratte: Mr. Thoppil, I’m looking at the transfer section of Supplementary Estimates (C) and I’m trying to comprehend the numbers. There’s a transfer of $23.7 million and another of $45.5 million from the Department of Indian Affairs to the new Department of Indigenous Services Canada. I don’t understand why it’s a negative. I’m sorry, maybe I should know this, but this is money leaving your department to the new department; right? Therefore it’s an expense. The other expenses are in the positive because it’s a request, so why is this in parenthesis and therefore a negative? I’m not sure why. Could you explain this?
Mr. Thoppil: Sure, senator, and it is complicated and technical. You will see that as a pervasive element throughout the transfer section of our supplementary estimates. I need to step you back to provide you with some context first before we get back to the specifics of your question, if you wouldn’t mind.
The Department of Indigenous Services Canada was created on November 30 of 2017, and Supplementary Estimates (B) were not finalized. There were a lot of elements already in the transfers this committee has already approved through Supplementary Estimates (B), but it could not be considered as part of the deemed appropriations. What are deemed appropriations? Deemed appropriations are what transpires when there is a machinery of government change in the middle of a fiscal year.
These Supplementary Estimates (B) items aren’t automatically transferred to the Department of Indigenous Services, so we have to put these items back into another supplementary estimates to do the transfer between the old INAC and DISC. If you go back to Supplementary Estimates (B), these elements will be highly familiar to you because you’ve approved them already.
Senator Pratte: If I look at the $45 million, you will remember last time you were here we discussed the cost of splitting the old department into two parts. Looking at some of those numbers, could we start to get a sense of the cost, or does this have nothing to do with that?
Mr. Thoppil: We are in the midst of creating governance systems, financial systems and different processes for both departments now that they’re both separate, legal entities, and therefore the discussion is trying to ascertain what is the degree of shared and common services that will be provided to both departments and what will be fully independent. We have not yet finalized that discussion, and that is why we have not yet finalized a number for what is the incremental cost associated to primarily the corporate and common services of the former INAC and what will be the new costs associated with the stand-up of the two departments as of yet. Those conversations are ongoing, and some of it will be dependent upon Budget 2018.
[Translation]
Senator Forest: Mr. Perlman, the write-off of $203.5 million in student loans is recorded in the 2017-18 budget. You usually disburse $2.7 billion and have a portfolio of $18 billion. What percentage of the total amount of loans repaid by students who honour their loans does the $203.5 million represent? Are we talking about 10, 15, or 20 per cent of the portfolio annually?
Mr. Perlman: That represents approximately 1 per cent of our portfolio.
[English]
The total for the Canada Student Loans is $18.3 billion — $2.7 billion per year — and we write off approximately 1 per cent per year to keep the assets clean and allow greater access to student loans for more Canadians.
[Translation]
Senator Forest: The total amount of about $18 billion nevertheless generates interest revenue for the government. What does that amount to?
[English]
Mr. Perlman: It’s considered an asset of the Government of Canada, so it’s not really an expenditure until we write it off. That’s when we come to the estimates to be able to do the write-off.
We expect them all to be paid off. One of the things that we have been working on very closely with Canada Revenue Agency and our service provider is how we can get these paid off better, and that’s why we have the repayment assistance program and other measures that we put in place to try to get these amounts down.
In fact, our three-year loan default rate has decreased significantly over the last few years. I can’t remember the exact year, but I believe it went down from 28 per cent, and now we’re aiming for about 9 per cent next year.
[Translation]
Senator Forest: The write-off in 2014 was much higher.
Mr. Perlman: Yes.
Senator Forest: Let’s take the example of a student who has $10,000 in student loans. He or she will not just pay back the principal, because the repayment covers the principal plus the interest. Is that right?
Mr. Perlman: Yes.
Senator Forest: Of the $18 billion, how much represents annual interest? If you are writing off $203 million, but bringing in amount of $1.5 billion in interest, the net amount makes it an entirely viable operation for the government. What do you think?
[English]
Mr. Perlman: I have the amounts for the write-off. Out of the $203.5 million, about $50 million is interest and the rest is principal that we’re writing off, but we expect that all the interest and capital are paid off.
[Translation]
Senator Forest: We are not seeing the whole picture. It would be interesting to have an idea of the amount of interest earned on the entire portfolio for us to appreciate the situation. You say that you write off 1 per cent. It would be helpful if you would let us know in writing how much interest on the loans is earned annually.
Mr. Perlman: Yes, we can do that.
[English]
Jason Won, Deputy Chief Financial Officer, Employment and Social Development Canada: The other thing I would add is that for the loans, they do not actually generate interest until the students actually finish studies. We could figure that out and present the breakdown.
[Translation]
Senator Forest: But the loans generate interest afterwards.
Mr. Won: Yes.
Senator Forest: Mr. Linklater, you are asking for $11.8 million in additional appropriations for the 2018 G7 Summit. Just before you, your Treasury Board colleagues were asking for $218.7 million in additional funds for that same activity. Is the amount of $11.8 million being requested by Public Services and Procurement Canada included in or in addition to the Treasury Board request?
[English]
Marty Muldoon, Chief Financial Officer, Finance and Administration Branch, Public Services and Procurement Canada: I apologize; I wasn’t present for the presentation commentary on that. For Treasury Board, if they were talking about the overall approval, then it would have included our amount. I’m sorry I wasn’t here for that particular question.
What I can explain is that, as a common service provider, the allocation for us — for the department of PSPC — is in order for us to secure the accommodations that will be utilized there, for the facilities and room nights for all the government officials and protection personnel and so on. It is also for us to do all the procurements that are required — it’s not the actual dollars for the procurement but for us to be able to provide that procurement service — and, finally, for all the translation and interpretation that will occur during that world summit. So that funds all of the linguistic services on behalf of all of the federal partners that will participate there.
[Translation]
Senator Forest: Therefore, your request for additional funds is in addition to what Treasury Board just requested.
Mr. Linklater: I think it would be a good idea to check because, as Mr. Muldoon mentioned, we are not exactly sure what the Treasury Board officials said in their presentation. However, we can provide an answer in writing to your clerk.
[English]
Mr. Muldoon: It’s unimaginable that they would have given a number at the $200 million level. It wouldn’t be for TBS. It has to have been the whole-of-government approach, including all the service providers to the games, but we will verify.
[Translation]
Senator Forest: It seems that the answer is in the document. Mr. Fleury is quick off the mark.
[English]
Senator Andreychuk: Am I to understand we’re now separating Indian and Northern Affairs Canada, as I remember it, into two departments, and it’s going to cost more for the administration of these two departments? So we’re creating two bureaucracies as opposed to what was one, and inevitably that’s not going to be cost-effective.
Mr. Thoppil: I believe Minister Philpott, responsible for the Department of Indigenous Services, has communicated publicly that the department has a mandate of planned obsolescence. So the strategic endeavour of this department is to, on the interim period, provide high quality programs and services that will be transferred, over time, to First Nations, Inuit and Metis and, therefore, end itself. That will be dependent upon the degree of co-development and the conversations that are going on across a number of programs and services, such as child and family services, housing reform and also the new fiscal relationship that is being discussed between First Nations communities, Inuit and Metis and the department.
In the larger context, there will be, in what was called the interim phase, an incremental cost to the administration to DISC to support that department, but the medium and long-term agenda is that it will transfer its programs and services one-by-one to Indigenous people’s controls and then eliminate the department.
Senator Andreychuk: Are you working from a blueprint and a time frame that we could look at? Because it is not a new idea to transfer services. That’s been implicit. If this is going to have some teeth to it, it would have to have time frames to justify increased dollars to administer it. I’m concerned about getting the services to where they’re needed.
Mr. Thoppil: That’s correct, senator. The concern of Minister Philpott was to ensure that, in the interim stage, the existing programs and services are adequately funded for the demands and the needs out there. The pace of transfer will be dependent upon those co-development talks, which are, in part, housed on the overall framework of the Recognition and Implementation of Rights Framework that the Prime Minister announced in Parliament a few weeks ago. There are a number of moving parts that make a defined blueprint not yet established at this point. We’ll have to see how the rights and recognition conversations on the legislation that will be tabled in the fall and the degree of movement on the various programs and services go in order to start establishing timelines, but we’re not there yet. We’re at the very beginning phase.
Senator Andreychuk: On student loans, I noted there was one court case recently where the department actually recovered or at least got a judgment against a student. Are there guiding principles of how you pursue collection? One the things that I hear from students is that, “Well, I’m paying, and others are not.” If you play the game, you can get away with it. Even if it is only 1 per cent or 2 per cent, there’s a little bit of an aura around universities and discussions. Is there a methodology that you use, and are there specific staff assigned for collections? Is that the way it works? Because you’re not using outside sources, or am I wrong?
Mr. Perlman: There are multiple aspects to collecting the student loans. We have the student loan provider that we work with through the National Student Loans Service Centre. So that’s where we go to collect the loans, and we work with the students to do that.
When a loan is delinquent for 270 days, the equivalent of nine missed payments, then it’s referred to the Canada Revenue Agency, who is our collection agency. They have a number of collection activities that they can follow, which include taking anything from their income tax refund. They can also undertake additional measures such as legal action or wage garnishment. There are many activities, so there is a very established process for getting back these loans.
Senator Andreychuk: We’d have to go to the CRA to find out how it’s done. Thank you.
Senator Cools: Thank you so much, gentlemen and lady, for being before us.
Mr. Linklater, my question is for you. How are you doing wrestling with the Phoenix, the big bird?
Mr. Linklater: Thank you for the question, senator. It’s not one I often get.
It is a challenging file, and as I said in my opening remarks, there are no quick fixes to this. The money that we are seeking through Supplementary Estimates (C) will help us continue to build our capacity on the ground and to hire back compensation advisers to work through the queue of accumulated work that we discussed when I was here last time. It will also help us to work more effectively with our service provider, IBM, to advance technological fixes and to put automation back into the system where it may have been de-scoped or where we felt we could deal with a manual workaround. But with forward thinking, we are now of the view that we need to make ongoing fixes on the technical side.
We’re also continuing to work with the unions. You will note that we’ve asked for funding to be able to provide advances, repayable advances, to the unions to ensure that their financial situation is not adversely affected by the Phoenix issue to a significant degree.
All this to say that I do have sympathy for staff who are affected by these issues. It’s unacceptable that these pay problems continue to persist and, with these funds, we hope to be able to bring stability to the system over the course of the coming year or so.
Senator Cools: Well, you’re sounding promising, so I encourage you and support you on that.
Mr. Perlman: Thank you.
Senator Pratte: Your request is for $166 million, and I’m just trying to see clearly here, because there are a lot of numbers bandied around as to the money that is being spent by the federal government in trying to stabilize Phoenix. One number that springs to my mind is $540 million. I think it comes from the Auditor General. Should I add the $166 million to $540 million and say that this is what it has cost the federal government up to this point? Is that a correct assumption?
Mr. Linklater: No, senator, it is not a correct assumption. To date, since going live in terms of funding to address the issues with Phoenix, we have spent approximately $250 million, which would include the funding noted here in Supplementary Estimates (C).
Senator Pratte: “We” being your department?
Mr. Linklater: Correct, and to some degree Treasury Board, given the integrated team that I lead and the resources there.
When we were here last, colleagues from the comptroller general’s office spoke about the exercise they are leading across government to seek from individual departments and agencies the additional costs they are laying out beyond their normal expenditures on HR and pay issues, and that exercise is due to be completed in May. At that point, we’ll have a good baseline as to what departments are expending, and we should be able then to be in a position to project going forward what the ongoing needs are in this space and what the total cost would be across government.
Senator Pratte: And 540 million was the Auditor General’s estimate.
Mr. Linklater: It was his estimate based on a survey of departments that participated in the fall audit, seven or 10 departments, if memory serves, which I think was their best estimates based on their own expenditures but representative.
[Translation]
Senator Forest: Mr. Thoppil, with regard to the amount of $50 million, we met with the Canadian Federation of Students and one thing they are asking for is special support for indigenous youth in order to encourage them. Is this additional $50 million envelope earmarked for scholarships? Is there a scholarship and loan program? What does it look like? Does the program consist specifically of scholarships for students who apply?
[English]
Mr. Thoppil: To my understanding, it is primarily scholarships and bursaries. There are no loans on offer.
[Translation]
Senator Forest: No loans.
Mr. Thoppil: No loans.
Senator Forest: Thank you.
[English]
The Chair: Before we end, I have a couple of questions for Mr. Linklater and a comment I’d like to share with all public servants.
Mr. Linklater, how much has PSPC paid IBM since February 2016 to upgrade the Phoenix pay system? Do you have that figure?
Mr. Linklater: I don’t have that figure with me, but I’m happy to provide it in writing as a follow-up.
The Chair: Thank you.
How many additional staff does PSPC plan to hire to stabilize the pay system in 2018-19?
Mr. Linklater: In terms of anticipated staffing, we are moving to a more regular intake of compensation staff. As you can appreciate, these are skills in wide demand across government, not just at PSPC and our network. I don’t have an exact figure for ongoing hiring. We need to see what the budget results in in terms of ongoing funding for PSPC for the project but, following that, we’ll be able to refine our planning and come back with a clear estimate. At this point, with the supplementary estimates funding, we will be at around 1,500 compensation staff, up from about 550 in Miramichi when we started. Our intent would be to maintain, if not grow, that level over the coming months to be more aggressively attacking the backlog.
The Chair: Thank you.
My last comment, as chair of the committee, is that our objective is certainly about accountability, transparency and predictability. Earlier, we had some comments made by Treasury Board that we envision as being positive.
I’m not questioning, as chair, the credibility of our public servants. As a matter of fact, as I was on a committee for the NAFTA agreement in Mexico City last week, I had nothing but praise for the public servants of Canada as professionals and also as being mindful of dispensing tax dollars. However, I’d like to send my comment to Mr. Thoppil, because I’m concerned and I would like to say I think we can all put our hat on this one.
We just received, Mr. Thoppil, some information from your department as a follow-up to your appearance on the Supplementary Estimates (B) in 2017-18 on November 29, 2017. While I have to admit, as the chair of the Finance Committee of the Senate, that we appreciate the information, please let your deputy minister or deputy ministers know that we expect, going forward, that information will be provided in a much more timely manner. I have to share with you that I wrote a letter to PCO on this matter, and we all have a common denominator: accountability, transparency and predictability.
Senators, our next meeting will be at 1:30 tomorrow in room 160-S.
(The committee adjourned.)