Proceedings of the Standing Senate Committee on
National Finance
Issue No. 88 - Evidence - February 26, 2019 (morning meeting)
OTTAWA, Tuesday, February 26, 2019
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to examine the Supplementary Estimates (B) laid before Parliament for the fiscal year ending Sunday, March 31, 2019.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: My name is Percy Mockler, senator from New Brunswick and chair of the committee. I wish to welcome all of those with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, the committee hearings are open to the public and are also available online at sencanada.ca.
I would now like to ask senators to introduce themselves.
Senator Klyne: Good morning. Marty Klyne, Saskatchewan.
[Translation]
Senator Forest: Éric Forest, Quebec
Senator Pratte: André Pratte, Quebec.
Senator Moncion: Lucie Moncion, Ontario.
[English]
Senator M. Deacon: Marty Deacon, Ontario.
[Translation]
Senator Forest-Niesing: Josée Forest-Niesing, Ontario.
[English]
Senator Boehm: Peter Boehm, Ontario.
Senator Andreychuk: Raynell Andreychuk from Saskatchewan.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Toronto, Ontario.
The Chair: Thank you.
I would also like to recognize the clerk of the committee, Gaëtane Lemay, and our two analysts, Alex Smith and Shaowei Pu, who team up to support the work of the Standing Senate Committee on National Finance.
This morning, honourable senators, our committee is starting its study of the expenditures set out in the Supplementary Estimates (B) for the fiscal year ending March 31, 2019.
[Translation]
These estimates were referred to the committee last Thursday, February 21. They are the last ones of this current fiscal year.
[English]
Honourable senators, your steering committee has identified 11 organizations of interest for their funds requests in the Supplementary Estimates (B). This morning, we will hear from four of them.
[Translation]
During the first hour, we welcome Mark Perlman, Chief Financial Officer and Senior Assistant Deputy Minister, Employment and Social Development Canada.
[English]
We also have Jason Won, Deputy Chief Financial Officer, Chief Financial Officer Branch.
From the National Energy Board, we have Mark Power, Vice President, Performance and Results and Chief Financial Officer.
[Translation]
He is joined by Jim Fox, Vice President, Integrated Energy Information and Analysis, National Energy Board.
[English]
Witnesses, thank you very much for accepting our invitation. Your presentations will be followed by questions from senators.
Honourable senators, I will also need your cooperation. Because of the number of senators who want to ask questions, you will each have four minutes to ask questions, including answers. If time permits, we will then move to a second round.
I have been informed by the clerk that Mr. Perlman has comments, to be followed by Mr. Power.
Mr. Perlman, the floor is yours.
[Translation]
Mark Perlman, Chief Financial Officer and Senior Assistant Deputy Minister, Employment and Social Development Canada: Thank you. Mr. Chair and members of the committee, I am pleased to appear before you in my capacity as Chief Financial Officer for Employment and Social Development Canada, or ESDC.
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 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]
As part of Supplementary Estimates (B), ESDC is seeking $181.5 million in voted appropriations. This includes $163.5 million related to the writeoff 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 writeoffs become a charge against appropriation and therefore require Parliament’s approval.
The government is assisting Canadians and managing debt loads through the Repayment Assistance Plan, or RAP. For borrowers experiencing difficulty repaying, the government’s RAP provides relief by paying interest or reducing loan principal, thereby reducing future writeoffs.
The Canada Student Loan program writeoff of $163.5 million in 2018-19 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 writeoff. The main criteria are statute-barred where 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 when the Crown can undertake to recoup that debt. Other reasons for writeoff include bankruptcy, extreme financial hardship and compromise settlements. This request is consistent with the regulations, as it has been determined that these debts are uncollectible.
Under vote 1, operating expenditures, $5 million is requested to administer the Accessibility Canada Act and to augment support for the Opportunities Fund for Persons with Disabilities. Funding in the amount of $3.4 million is also being requested for the Youth Employment Strategy to deliver high-quality job placements under the Canada Summer Jobs program. This program supports placements that, among other things, take place in safe, inclusive and healthy work environments.
Funding to implement the 2030 Agenda for Sustainable Development — $3 million — to support the establishment of the Sustainable Development Goals Unit within ESDC and support the creation of a new SDG funding program is requested through these supplementary estimates, as well as an amount of $1.6 million to replace aging communications equipment by migrating to a government-wide call centre platform through Shared Services Canada.
Under vote 5, grants and contributions, $4 million is requested for the SDG Funding Program. The SDG Funding Program will aim to strengthen partnerships with organizations to mobilize sustainable development efforts, deliver improved outcomes to Canadians, and foster innovative and horizontal initiatives that support the achievement of Sustainable Development Goals in Canada. There is also $1.1 million requested for the Accessible Canada Initiative to connect employers and persons with disabilities, and to help businesses develop effective recruitment and retention strategies.
ESDC is including a transfer of $96,500 in vote 5 to the Department of Indigenous Services Canada to support policy and engagement activities related to Indigenous housing.
[Translation]
Additionally, through these supplementary estimates, we provide Parliament with an update on various 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 $539.5 million. This is mainly due to the Canada Student Grants, a $409.3 million increase, as a result of a greater than anticipated effect on the value of grants disbursed through the new program initiatives announced in Budget 2016 and Budget 2017. Budget 2016 expanded eligibility thresholds for Canada Student Grants and introduced a fixed student contribution to determine eligibility for grants, while Budget 2017 provided greater funding for students who support families and adults returning to school.
Finally, there is a net increase of $358.5 million for the non-budgetary statutory items, which include the Canada Student Loans and the Canada Apprentice Loan. This is mainly due to the fact that Budget 2016 introduced a fixed student contribution model in August 2017, replacing the previous system of assessing students’ estimated future income and assets with a fixed contribution so that students can work and gain valuable job experience without worrying about a reduction in the amount of financial assistance.
In addition, the threshold for eligibility for Canada Student Loans for part-time students was increased in Budget 2017 so that even more part-time students can qualify for assistance.
I hope this overview has given you a better understanding of the Supplementary Estimates (B) for our department. My colleagues and I would be pleased to answer your questions.
The Chair: Thank you, sir.
Mr. Power, please.
Mark Power, Vice President, Performance and Results and Chief Financial Officer, National Energy Board: Good morning, Mr. Chair and committee members. I would like to begin by acknowledging that we are meeting on the unceded territory of the Algonquin Anishinaabe people. I also want to thank the committee for the opportunity to discuss the National Energy Board’s expenditures in the Supplementary Estimates (B) for 2018-19.
My name is Mark Power, and I am the National Energy Board’s Chief Financial Officer and Vice-President of Performance and Results. With me today is Mr. Jim Fox, Vice-President of Integrated Energy Information and Analysis.
Before I begin my discussion on the expenditures, I would like to give a brief overview of who we are.
The NEB was established by Parliament in 1959 as an administrative tribunal to make regulatory decisions and recommendations to the Government of Canada. We are the expert life-cycle regulator for approximately 73,000 kilometres of international and interprovincial pipelines and 1,400 kilometres of international power lines. We also regulate imports and exports of energy products and oil and gas exploration and drilling in certain northern and offshore areas of Canada.
The NEB oversees the safety and environmental protection of projects throughout their life cycle, from the application phase to construction, operation and eventual abandonment.
The NEB’s operations are funded from parliamentary allocations. However, the Government of Canada recovers approximately 97 per cent of the NEB’s costs, according to the National Energy Board Cost Recovery Regulations. Briefly, recoverable costs are those incurred by the NEB by regulating oil, gas and other commodity pipelines and NEB-regulated electricity transmission lines. Currently, the approximately 3 per cent non-recoverable costs are generally those incurred under the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act.
I would now like to give the context of the NEB’s expenditures found in the current Supplementary Estimates (B).
Last week, the National Energy Board delivered its reconsideration report to the Government of Canada on the Trans Mountain expansion project. The reconsideration hearing and report specifically examined the impacts of project-related marine shipping related to the application of the Canadian Environmental Assessment Act, 2012, and the Species at Risk Act, as per the government’s direction to the NEB in September 2018.
In carrying out the reconsideration, the NEB held a public hearing, which included the participation of 118 interveners, including 52 Indigenous interveners and 8 federal government department interveners. Interveners were provided with the opportunity to file evidence, ask questions about the evidence of other parties and submit arguments. The hearing also included the provision of oral traditional evidence by Indigenous interveners. Any member of the public was able to file a letter of comment on the reconsideration, and many took the opportunity to do so.
The NEB’s request for approximately $6 million in the Supplementary Estimates (B) is related to the costs for that reconsideration. More specifically, two thirds of this funding request, or $4.24 million, is for the anticipated costs of the Participant Funding Program.
The NEB’s Participant Funding Program, which was established in 2010, provides financial assistance to individuals, Indigenous groups, landowners and non-industry not-for-profit groups so that they can participate in certain project hearings and environmental assessments of designated projects.
For the TMX Reconsideration process, eligible groups could request up to $80,000 and individuals up to $12,000 to participate in the hearing. In total, the NEB approved just under $5 million for 69 recipients, 82 per cent of which were Indigenous groups. While just under $5 million has been approved, the Participant Funding Program only reimburses based on claims for eligible costs. Final claims are due on March 26, 2019.
The remainder of the funding request in the Supplementary Estimates (B) relates to additional costs associated with the reconsideration, which include the overall hearing expenses as well as the appointment by the Governor-in-Council of a marine expert to provide advice to the board in its review.
That concludes my remarks. Thank you, Mr. Chair, for inviting us here, and we look forward to answering your questions.
The Chair: Thank you, Mr. Power.
Senator Marshall: Thank you very much. My first question is for Employment and Social Development Canada, Mr. Perlman. In your opening remarks, you mentioned the 2030 Agenda for Sustainable Development and $3 million. What’s the 3.9 in vote 5b? Is that also for sustainable development?
Mr. Perlman: Yes, that’s for the Sustainable Development Goals for this year. These are grants and contributions that have been contributed by the six partner departments into a fund, so it’s existing funds being transferred to us as a department.
Senator Marshall: Can you link that back to vote 40? In the budget process, there was $3 million earmarked for the 2030 Agenda for Sustainable Development, so there should be $3 million in vote 40. If it’s in vote 40, it has already gone through a supply bill, so will this go through a supply bill again? I’m just trying to trace the money.
Mr. Perlman: I just want to confirm that that one was in vote 40 because I thought that was an off cycle, but I could be wrong.
Jason Won, Deputy Chief Financial Officer, Chief Financial Officer Branch, Employment and Social Development Canada: I don’t believe that the sustainable funding is coming through the supplementary estimates and was not included in vote 40.
Mr. Perlman: I believe that one was an off-cycle funding decision from the Minister of Finance.
Senator Marshall: So this is entirely new money and you’re not accessing anything from vote 40?
Mr. Perlman: Not for that particular one.
Senator Marshall: Okay. I’ll follow that up with Treasury Board. I don’t have any other questions for you at this time.
For the National Energy Board, thank you for the breakdown of the $6 million. You made 16 recommendations and they’re all addressed to the Governor-in-Council. Does that finish your involvement, or do you follow up to see what’s done? What’s your involvement after the process, after you’ve issued your report?
Jim Fox, Vice President, Integrated Energy Information and Analysis, National Energy Board: Thank you for that question, senator.
Our typical involvement, where we would follow up if the government decides to approve the project, is that we would continue to regulate the project through its reconstruction, construction and operations phases.
With the recommendations, I’m not sure it’s entirely clear what our involvement would be. We would be open, obviously, if the government wanted us involved in the implementation of those. They would ask us to be involved. But the reason they’re recommendations to the Governor-in-Council is they don’t fall squarely within the National Energy Board’s jurisdiction.
Senator Marshall: The Parliamentary Budget Officer released a report on Trans Mountain about a month ago and there was a little bit of disagreement with regard to the government’s response. Do you look at those reports, or is that just something outside your jurisdiction? What’s your involvement?
Mr. Fox: We did look at the report. I read it on the plane yesterday, actually. The Parliamentary Budget Officer’s report and their relationship with Parliament is something that falls outside of ours. The report itself doesn’t have a role in the NEB’s oversight of the Trans Mountain pipeline.
Senator Marshall: Would it be fair to ask you whether you agree with the report?
Mr. Fox: It’s always fair to ask, senator, but I can’t tell you whether I agree with it or not. When I read it, the Parliamentary Budget Officer made some assumptions, and those assumptions could be up for debate.
Senator Pratte: Mr. Perlman, I want to go back to student loans. Of course, this is not the first time you’ve come before us for writeoffs of student loans, and I guess it’s to be expected.
I was looking at the latest Chief Actuary report on the student loan program, even though I forgot my glasses in my office this morning, so I’m trying desperately to decipher the numbers. I think I can see that they project an increase in the value of writeoffs from year to year, to 2040, to $300 million. That would be because there are more loans, if my understanding is correct, and because the interest rate is higher.
Would you care to elaborate? With regard to this projected increase, do you agree with the Chief Actuary, and is that reason for concern?
Mr. Perlman: I never want to go against the Chief Actuary, and I’m not doing so in this case either. The Chief Actuary brings in a lot of factors and provides a very conservative estimate of what the amounts are. Because a lot of the collection efforts — and I know this committee has asked this question in the past — are to ensure there are enough incentives in there to be able to get the writeoffs down, we’ve actually been coming in every year below what the Chief Actuary has projected.
So it is a conservative amount. This year, for example, is significantly less than last year.
Senator Pratte: Let’s not talk about precise numbers but the trends that he identifies, because there are more loans and the loans are more generous now because of some of the improvements you discussed. Should we expect that writeoffs would be higher, or you don’t think so?
Mr. Perlman: The possibility is there, yes, just because of the quantity. At the same time, we’ve been using different factors, like our Repayment Assistance Plan, Canada Student Grants. We’ve been targeting the more vulnerable recipients to lower the risk of our Canada Student Loans defaults.
Senator Pratte: Thank you.
To the NEB, I want to make sure I’ve got this right. I believe you said, as far as participant assistance, that there was a little less than $5 million to 59 participants. Am I correct? Or 69?
Mr. Power: It was 69, senator.
Senator Pratte: Out of how many participants in total?
Mr. Power: One hundred and eighteen interveners participated. We also had written evidence filed by 81 parties and 25 oral traditional evidence sessions.
Senator Pratte: I guess I should know this, but I don’t. What criteria apply when someone is asking for your support to participate? How do you decide, for instance, the amount that can go up to $80,000? How is that decided?
Mr. Fox: Thank you for that question, senator. There is a set of criteria that is publicly known, so who can apply for help and what kinds of things can be covered. Typically, the things that would be covered would be expenses for expert evidence, someone to go out and do a study of some sort, travel costs, costs of per diems and honorariums in certain circumstances. The kinds of costs are set out in a public guidance document that we have on our website for those parties.
Senator Pratte: Has this program changed in recent years, become more or less generous?
Mr. Fox: It has become more generous in recent years, yes.
Senator Pratte: How so?
Mr. Fox: The amounts being requested by people and the caps we’re putting on the specific awards have increased in recent years.
Senator Pratte: Finally, the $6 million, should we expect this is it, since the reconsideration of Trans Mountain is finished? Is $6 million the total amount that we can expect, or should we expect that more money will be needed in the end?
Mr. Power: Thanks for the question, senator. The $6 million request should be sufficient to cover the cost of the reconsideration. The $4.9 million of participant funding was sufficient. To date, we’ve had approximately $400,000.
The participant funding as well, we award an amount up to $80,000 for groups and $12,000 for individuals. It has to be substantiated with valid expenses in a valid claim. Our experience, I believe, is approximately an 80 per cent payout. So we’re looking at an amount that’s less than the $4.9 million that was awarded.
In the O&M category, we believe we’re sufficient. There are still costs to come in, especially as we’re getting close to fiscal year-end. And our salary amount was per our estimate.
Senator Pratte: Thank you.
Senator Eaton: Mr. Perlman, this committee last year received a submission from the Receivable Management Association of Canada. They argued that your six-year limitation for collection is arbitrary and out of step with price sector collection practices.
Are you reviewing your collection practices in any way? Do you agree with them? Do you disagree with them? Why would you be out of step with the professional people who do that?
Mr. Perlman: I have my colleague, the Assistant Deputy Minister of the Learning Branch. I don’t believe there are plans at this time to look at the limitation. And I can’t offer an opinion as to the legislation.
Senator Eaton: Thank you.
If a loan is not recoverable, does that affect a person’s credit rating?
Mr. Perlman: Yes. We do have a service provider, Davis + Henderson. They do monthly credit reports. If someone defaults in the collection of the loans, they do report that to the credit bureaus as well. So it does have an impact.
In fact, I’ve seen studies similar to what you were saying, where people weren’t aware of the impacts of student loans, so that’s why they were paying back other types of loans first. They started realizing, when CRA followed up on the collections, that there were significant impacts.
Senator Eaton: Thank you.
My next question is to ESDC. I guess it’s you again, Mr. Perlman. In your presentation, you include a transfer of $96,500 in vote 5 to the Department of Indigenous Services Canada to support policy and engagement activities related to Indigenous housing. Could you elaborate on that?
Mr. Perlman: I would be pleased to.
In this particular case, Indigenous Services Canada has a contract with the Native Women’s Association of Canada. This is part of the co-development, co-creation aspect. They’re going to be engaging with Indigenous communities to undertake research and policy analysis on the impacts of housing and the needs of Indigenous women, two-spirit and gender-diverse people.
Because Indigenous Services Canada was already doing a much larger contract, we felt that the cost-benefit and working together in harmony would be better to transfer to them the small amount to get our ends met.
Senator Eaton: It seems a lovely abstract thing, because when Canada Mortgage and Housing Corporation come before us every year, I ask them whether they’re building houses to codes or whether they’re developing codes that would impact violence, mould, a lot of other things. The answers up until now have been no.
So I’m wondering how effective $96,000 is. Is it to make people feel good or is it to give them a forum? Do you think that will lead to something like building codes or housing that gives women better protection?
Mr. Perlman: I believe it’s all under the Reaching Home initiative, which is a $413 million initiative over nine years. This is to help inform the information going forward.
The $96,000 is a small amount but, as I said, it’s part of a larger contract that Indigenous Services Canada is doing.
Senator Eaton: When you say “Indigenous Services Canada,” does that include Inuit? They have a real housing crisis up there.
Mr. Perlman: I’m not sure.
Mr. Won: This particular funding is directed to the Native Women’s Association of Canada to do the engagement —
Senator Eaton: Does that include Inuit women? Are they considered Indigenous?
Mr. Won: I’m not sure whether Inuit women are part of the Native Women’s Association or the ITC, but we could certainly find out and get back to you.
Senator Eaton: It would be interesting.
Senator Boehm: Mr. Perlman, I have a few questions, following up on Senator Marshall’s questions on the 2030 Agenda and the 17 Sustainable Development Goals.
Is there a specific number of SDGs that ESDC would be looking at, considering the vast mandate the department has?
Mr. Perlman: We are doing the government-wide coordination of the six departments that are working on it. We are creating the secretariat within the organization to look at the 17 Sustainable Development Goals overall. Right now, it’s in ramp-up mode.
Senator Boehm: So the funding is for setting up that coordination?
Mr. Perlman: Yes, it’s to set up the coordination body. The government decided that ESDC, under Minister Duclos, would be leading that on behalf of the six departments.
Senator Boehm: You mentioned in your comments that you were working with various stakeholders or groups. Are these civil society organizations, NGOs?
Mr. Perlman: It’s to work with other federal departments, provinces, territories, municipalities, Indigenous people, civil society, business, international partners and youth, among others. It’s supposed to be very inclusive.
Senator Boehm: It’s very broad.
Do you see the ramping up continuing with further asks in the future?
Mr. Perlman: I’m not sure if there are further asks on SDGs.
No, there is not an expectation at this time, sir. I’ve just checked with my colleague.
Senator Boehm: Thank you.
[Translation]
Senator Forest: I was impressed last year by the amount of student debt that was written off. Today we are talking about 31,658 loans for a total of $163 million. Can you give us, in order of magnitude, the percentages that this represents? Does this represent 2 per cent of the portfolio? This is a considerable amount of money in absolute terms, but in terms of the whole portfolio, what percentage does this represent?
[English]
Mr. Perlman: Thank you for the question. This represents 0.85 per cent of the loan portfolio. Right now, the loan portfolio sits at about $20 billion overall, so $163.5 million represents 0.85 per cent, less than 1 per cent.
If I may, I have to apologize to Senator Marshall. I made a mistake in my answer. The first $3 million was actually in vote 40. It was under horizontal initiatives, vote 10, through Treasury Board.
Senator Marshall: When I do my follow-up, I will ask why.
Mr. Perlman: I didn’t want you to have to follow up with my colleagues on my mistake.
[Translation]
Senator Forest: Did you assess the costs? Student associations, along with some provinces, are asking.... Right now, it’s prime plus 2.5 per cent or 5 per cent, which is still quite a lot. How much would it cost if the interest rates were abolished?
[English]
Mr. Perlman: I can give you a general statement. I know we are constantly looking at what the impact is on interest rates.
As a bit of a follow-up to your question from last year, the interest is approximately $720 million. The cost of administering the program, net of that, is just slightly over $2 billion. Anything we would eliminate would basically be an additional cost to the program. We are not making any kind of a profit off of the interest; it’s only offsetting the costs a small percentage, if that answers your question.
[Translation]
Senator Forest: It’s a small percentage. Nevertheless, it’s prime plus 2.5 per cent for a variable rate, or 5 per cent for a fixed rate. That percentage is still quite high.
Mr. Perlman: Yes. Furthermore, this motivates students to pay back their loans.
Senator Forest: I worked at the municipal level, and contractors were responsible for the consultation fees. Is it the National Energy Board’s policy to ask the contractor to pay the $6-million fee for the Trans Mountain project or for any other projects on which you hold public consultations?
[English]
Mr. Power: Thank you for your question, senator. I’ll go about answering your question this way. I’m not sure I understand: Is it our policy to have other people pay for our consultations? Within our framework, we incur costs obviously through salaries and O&M, et cetera. Also, 97 per cent of our costs under the current regime are billed to the companies we regulate. It’s the same for everybody; it’s a level playing field. The pipeline companies collect those costs and flow them through to the shippers, the people who ship product through the pipelines. It’s an “end-user pay” kind of model.
I don’t know if that answered your question, senator.
[Translation]
Senator Forest: Not really.
The Chair: Senator Forest, you may ask more questions in the second round.
Senator Forest-Niesing: My question is for Mr. Perlman, the representative from Employment and Social Development Canada. Last week I met with representatives from the Canadian Federation of Students, and they shared some rather alarming information regarding the skyrocketing levels of student debt in Canada. In the estimates, and more specifically in the departmental report, 2018-19, I saw that this change was expected to make an additional 13,000 students eligible for grants. I have quite a few questions for you about the grants and loans regime. I’ll leave you the rest of my speaking time so that you can answer as many questions as possible.
First of all, to help me better understand, can you tell me the average amounts of a student grant and a loan? I’d also like to know the total amount loaned to students. What percentage of these loans is paid back? Your projections provide for a significant number of student loans to be written off, but I’d like to know how this compares to the percentage of loans that are paid back.
Mr. Perlman: I’m going to ask my colleague for help in answering your questions, because this is his domain.
Senator Forest-Niesing: Thank you.
[English]
The Chair: For the record, can the official identify himself?
Alexis Conrad, Assistant Deputy Minister, Learning Branch, Employment and Social Development Canada: I’m the Assistant Deputy Minister for learning at ESDC, and part of my responsibilities is the student loans program.
Senator, you have asked a number of questions in terms of how much students get. I can give you a few of the answers. For example, with the 30,000 accounts that we write off relative to the overall number of students going through the system, we have about 600,000 students every year who get money from the Government of Canada.
Senator Forest-Niesing: So 600,000?
Mr. Conrad: Yes. We have about 650,000 who are in their studies somewhere. They may not be borrowing money that year, but they are somewhere in their studies. We have about 900,000 who are actively in repayment. There are about 200,000 struggling with repayment in one form or another, but not in a writeoff situation; and about 30,000 who are in a writeoff situation.
The number of accounts we actually write off relative to the overall size of the portfolio is quite small. As my colleague Mark said, there is $20 billion in the loan portfolio.
One of the important things to note about the loan program is that when students apply, the grants come first. We always give students the grants, and then any residual amount that is part of their needs assessment goes to the loan part of it.
At the end of their studies, the average student owes about $13,000 to the Government of Canada. That has been going up slightly but relative to the cost of inflation. And the cost of education has not been growing, largely as a result of the grants that have been increased over the last couple of years.
So the focus has very much been on increasing the non-repayable assistance, the grants that Mark talked about. Other changes we have made have in some cases made administration easier and have given students access to more loans, but the focus very squarely by the government has been on grants.
The Chair: Thank you.
Senator M. Deacon: My questions are almost exactly the same. Timing is everything. For three weeks we have met with universities, colleges and groups. Either that’s wonderful timing or a bit of a stress for you; I don’t know. I think on our minds are some very specific questions because the stories the students are telling us are of $53,000 debts and working part time. So we are trying to understand the picture, the trending and certainly the challenges.
I heard the number 600,000 from Mr. Conrad. In addition to the questions that were just asked by my colleague, I’m trying to understand the last maybe three to five years. Has the number of grants and the number of loans stabilized over the last three to five years? Is one increasing and not the other? I’m trying to get that sense as part of an additional question from earlier. I wonder if you can comment on that first.
The second number touted was the average debt or loan being $13,000. Is that a total? Or is that a year? We hear such staggering numbers.
Mr. Conrad: To the last part of your question, the $13,000 is the federal Canada Student Loans program. That is a portion of student debt. The way the program is structured, the Government of Canada pays 60 per cent of the assessed need for a student and the balance is provided by provincial governments. We only have our data, and our program only covers that 60 per cent.
There are students whose needs assessment may be higher. They may find funding through other sources because there are weekly limits on how much money we will loan. That puts some students presumably in a position where they seek other funds. A lot of that funding often will come through a Registered Education Savings Program where parents and others have saved for a student’s education. So that’s part of it.
The total size of the program has been growing. There are more students than ever attending post-secondary and there are more students than ever receiving support. The number of students in the system is growing for a couple of reasons. One is overall demand. Also, more students are becoming eligible for the funds. There were some students, for example, who wouldn’t have received support, but changes have been made that have made them eligible. So both the loans and the grants have been growing. But the grants have been growing at a much sharper rate because of the investments the government has made and because we have removed situations, for example, where a student who, if they had one dollar more of income, would get no grant. Instead, what we have done is gradually put it in so that they get weaned off the grants. So you have more students receiving that kind of financial support. Overall, students are doing better as a result of the changes that have come in over the last three years. The program is growing, so you see the loan portfolio growing at the same time.
Senator M. Deacon: I have gone through these numbers a number of times, and the effort and energy into recoverable and not recoverable and risk. Because as you make the acceptance and grow, with that comes an element of risk. As you move forward, is there something you are thinking needs to be done differently in order to minimize the loss?
Mr. Conrad: There are lots of things we are actively doing the minimize the loss. That’s why over time you see us doing better. Obviously, the committee is concerned when the government is writing off $163 million, and that’s significant for us as well.
One of the things we have been doing is trying to get more information out of the students, ensuring their regular repayment. The best thing they can do is not walk away from the debt. The best thing they can do is take advantage of the support for repayment assistance. For example, we are working with our service provider, and we’re seeing uptakes. Part of the costs where you have seen an increase in Supplementary Estimates (B) have been part of repayment assistance. The other part is that CRA, which handles collections of defaulted loans, has been investing a lot of money in tracing and other activities. A lot of times, students are hard to find or, in a lot of cases, they don’t know anymore what their situation is. They have become very disconnected.
Senator M. Deacon: Thank you.
Senator Moncion: How much do you recover? Once they are written off, you are still looking for people who have stopped paying. So how much do you recover? Do you keep on working on the cases or forget them?
Mr. Conrad: With CRA, once the debt is written off its gone, to my knowledge. There may be a couple of cases where students come back and realize something has happened and want to repay the loan, but once it is written off, it is largely gone once the government has discharged the debt. And that $163 million is very much the end of a process of student loans where the money was borrowed many years before, students have gone through studies and gone through at least six years of not acknowledging the debt. So there are a lot of steps before we get to that last residual piece, and that essentially is, for all intents and purposes, gone.
Senator Moncion: I go back to Senator Eaton’s question. She was saying it affects the credit bureau. If there is an amount on your credit bureau that is unpaid, it stays there for a long time. So you are saying that once it’s written off, they are discharged from the debt and you are not going to do anything else on it, not even the credit bureau.
Mr. Conrad: The credit hit, as it were, on their credit rating is there, and through the normal credit rating system after a certain amount of time, that will start to become less of a variable in terms of their credit rating. Once we have written off the debt, we don’t go back and make any changes to their credit rating. We’ve done that already through the repayment system. We let the credit rating naturally evolve as it would based on the other variables in a student’s life or someone who previously was a student.
Senator Moncion: Is the first provider for these loans still one of the major banks?
Mr. Conrad: No. Actually, several years ago the government took back the responsibility from the financial institutions.
Senator Moncion: So it is done through the government now.
Mr. Conrad: We contract out a part of it to a private company. My colleague had mentioned Davis + Henderson, but it’s a government loan now. It’s not a private sector loan from a bank. It was at one point.
Senator Moncion: Thank you.
Senator Marshall: I want to go back now to the $3 million. Vote 40 is very controversial because this year is the first year that the government ever used it. It has already been approved by a supply bill, but now it shows up again and will end up in another supply bill. Effectively, Parliament is approving the funding twice. Explain that to me. I don’t understand why it shows up in Budget 2018 where you are going to be asking for approval for that money a second time.
Mr. Won: I appreciate that, senator. I guess the issue is in the list in the budget table, the infamous A2.11, that had the list of all the initiatives by department.
Senator Marshall: That’s what I have here.
Mr. Won: This was not included in ESDC’s 14 items. So it was under the allocation to be determined amount.
I agree with you that there is the funding in vote 40. I guess in a way it provides more transparency that this is actually being provided to ESDC. I think at the time we were still determining which department was going to be the lead on the SDG. So, we would have to confirm with TBS as to why they thought it would be appropriate to include it essentially twice, but I think it does provide a level of transparency about where the money was, which department was receiving the funding, whereas it was not clear when they published the budget.
Senator Marshall: It just demonstrates the concern we had a year has come to pass. So $3 million is left in vote 40. Will you be getting that money, or is that going to be left there for someone else to use for something else?
Mr. Won: My understanding of the way it will work, because we have been working with TBS closely, is that I think by the end of the session the department will have access to almost 100 per cent of its vote 40 amounts. We will not get extra funding.
Senator Marshall: You won’t but Treasury Board will.
Mr. Won: Well, no, I think — well, they’re reporting monthly or periodically. It was supposed to be monthly initially. I think it’s now probably every few months they update their table online, and it shows —
Senator Marshall: So it should be still in their table, but it will be there for them to use for something else.
Mr. Won: My understanding is the way they are going to present it is they are going to show it as allocated to ESDC. That’s just the table, online. It doesn’t have any sort of parliamentary status. I think for the record it will be deemed as kind of used as per vote 40.
Senator Marshall: The project has been funded twice to the tune of $3 million.
Mr. Won: The department will only get it once.
Senator Marshall: You are looking from your perspective. I’m looking at it from an overall government perspective. Thank you.
[Translation]
Senator Forest: I’ll ask my question again, because I may not have been clear enough. At the municipal level, when there is a consultation, for example on whether to amend a city plan, the contractor will be billed for the costs associated with this consultation. I’d like to know whether the same was true in your situation. For example, on a project like Trans Mountain, which requires an environmental impact assessment, is it the board’s policy to bill the costs of the consultation to the contractor bidding on the project in question?
[English]
Mr. Fox: I will try, senator; thank you for the question.
The NEB is all 97 per cent cost recovered. So all of the costs NEB expended, including the participant funding costs and all of the costs of our own staff and travel and everything, will be recovered through our cost recovery regulations which charge companies that ship oil and natural gas. So all of the costs that came out through us will be recovered.
[Translation]
Senator Forest: If the project requires an environmental impact assessment and the recommendation is to not move forward with the project, the contractor would not have to pay anything, since the project would not be carried out. Is that it?
[English]
Mr. Fox: That’s a good follow-up. In this situation, Trans Mountain is already regulated by the National Energy Board. So those costs would be recovered from the industry. The way that our cost recovery regulations work, essentially the costs that we incur for oil pipelines go to the pipeline companies generically and we divide up the costs based on the number of barrels that flow through them. So those costs would be recovered, and Trans Mountain would have to pay part of that.
In another circumstance where the company is not regulated by us in advance, it would be the rest of the oil pipeline industry, which is already regulated by the NEB, that would pay those costs. So the costs would always be recovered, not always directly from the applicant.
Senator Klyne: Good morning and thank you for appearing this morning. I have one question for Mr. Power and one for Mr. Perlman.
Mr. Power, I am looking at what I assume is not an overlap, but I want to make sure. I see the Department of Indian Affairs and Northern Development has been allocated $313,000 for the TMX Reconsideration, while you’re requesting an additional $6 million for the Trans Mountain Expansion Project. I’m wondering how those monies will be used. Are you aware of the 313,000 that is coming through Indian Affairs and Northern Development? Since they are two different departments, NEB and Indigenous-Crown Relations, is there any overlap of that usage regarding the Trans Mountain project?
Mr. Power: Thank you for your question, senator. We were part, along with Indian and Northern Affairs, of a multi-department, multi-organization Treasury Board submission. The scopes of work were built by each organization. So the $6 million that we requested was solely for the use or solely for the purpose of the TMX Reconsideration. Indigenous and Northern Affairs would have looked at whatever scope of work they needed to do and cost estimated that, so I do not believe that there is any overlap of the amounts.
Senator Klyne: That leads me to another question. Do we have a new total now of all the monies for funding allocated to TMX across all ministries and departments?
Mr. Fox: I don’t think, senator, that would be something that would be available to us. It may exist somewhere, but we only find out about our own funding.
Senator Klyne: Okay, very good.
Mr. Perlman, last year, it was related to this committee — I was not here, but I found this in our notes — that it was the intent to try to reduce that 9 per cent, three-year default rate, which doesn’t surprise me. Earlier, you mentioned a lower default rate on the existing file. If we look at it over a three-year loan default rate, it’s 9 per cent.
Mr. Perlman: Yes, it’s 9 per cent, but I don’t think I mentioned there was a lower default rate.
Senator Klyne: Oh, it’s a percentage of your book.
Mr. Perlman: It’s the percentage of the total asset base.
Senator Klyne: Because that three-year rate keeps moving, where is it at now? What’s the new three-year —
Mr. Perlman: I believe it’s still at 9 per cent.
Senator Klyne: How could you manage that down below 9 per cent?
Mr. Won: The department continued to work with the CRA and the service provider as well on the increases to the program such as the Repayment Assistance Plan and then negotiating payment plans to help students, when they’re finished, to make the payment. The rate has been forecast by the Chief Actuary and was rarely stable. It has come down significantly since the early 2000s. There were double digits certainly in the early 2000s, but it has come down to 9 per cent and stabilized there.
I think people can understand that essentially the government is the lender of “only resort,” essentially, so I think that’s not an unreasonable rate.
Senator Klyne: Thank you.
Senator M. Deacon: Mr. Perlman, I want to come back to the student loan issue and something. We learned that the current minimum after-tax income an individual can make before they are required to start paying back the loan is $25,000, which is low by living standards and life in Canada.
Can you let us know what, if any, downside there would be to raising that threshold? If we raised that threshold, would it be possible to have a more livable salary before payments need to be made? Do you think it would lead to more problems, fewer defaults? Do you have any thoughts?
Mr. Conrad: Senator, you’re correct. The minimum income at which a single person has to pay is $25,000, but if people have dependents, that amount goes up. That was previously around $20,000 and the government moved it to $25,000. Moving it higher would cost the government more, given the cost of the system.
I think the most important thing about looking at that number is it’s not the only variable we put in place around affordability of paying back the loan. The loan is amortized over a set period of time, and there is a limit on how much of someone’s income they have to pay. No one pays more than 20 per cent of their income. Most are around 10 per cent.
We really have to look at all the parameters of getting people into repayment, and the minimum amount is simply one of them. Over time we’ve adapted a number of them, and we feel at the moment the system is actually working a lot better than it had been in the past. We feel quite comfortable that students have the supports.
One of the biggest variables is actually getting students to apply for repayment assistance if they’re entitled to it. That has been a large part of our focus over the last year or so.
The Chair: Honourable senators, thank you very much. To the witnesses, thank you.
We will continue our study of Supplementary Estimates (B).
[Translation]
We now have before us representatives from the two departments now responsible for Indigenous Services Canada.
[English]
We have Paul Thoppil, Chief Finances, Results and Delivery Officer, Indigenous Services Canada. He is accompanied by Odette Johnston, Director General, Children and Families Branch.
We also have Alex Lakroni, Chief Finances, Results and Delivery Officer, Crown-Indigenous Relations and Northern Affairs Canada; and also Eric Marion, Senior Director Fiscal Policy, Policy Development and Coordination Branch.
Welcome, and thank you, Mr. Thoppil and your team, and Mr. Lakroni and your team, for accepting our invitation.
I have been informed by the clerk that Mr. Thoppil has comments to share with us, to be followed by Mr. Lakroni and then questions by the senators.
[Translation]
Mr. Thoppil, the floor is yours.
Paul Thoppil, Chief Finances, Results and Delivery Officer, Indigenous Services Canada: Honourable senators, thank you for the invitation to discuss the Supplementary Estimates (B) for the fiscal year ending March 31, 2019.
[English]
First, I’d like to draw the members’ attention to a deck entitled “2018-19 Supplementary Estimates (B),” which I have tabled with the committee.
[Translation]
Slide 3 shows that ISC Supplementary Estimates (B) for the fiscal year ending March 31, 2019, includes initiatives totalling $273.6 million, which will bring the total funding for the department to approximately $11.7 billion for 2018-19. This funding will support the department to improve access to high-quality services for Indigenous peoples; to improve the socio-economic conditions, quality of life, and safety in their communities; and to facilitate the path to self-determination.
[English]
With respect to financial highlights, slide 4 shows a net increase of $273.6 million. That is composed primarily of $99.8 million for the Emergency Management Assistance Program; $70.3 million to reform First Nations Child and Family Services; $64.4 million to advance the new fiscal relationship with First Nations; $37.5 million for the transformation of First Nations elementary and secondary education programs; and $31.7 million for internal support services, offset by a net transfer out of $47.3 million with other government departments, primarily with Crown-Indigenous Relations and Northern Affairs Canada.
Slide 4 also provides a display in terms of voted expenditures. A net increase of $32.9 million will flow through vote 1, operating expenditures; a net decrease of $0.2 million in vote 5, capital expenditures; and a net increase of $270.8 million will flow through vote 10, grants and contributions.
I will now describe the major items included in Supplementary Estimates (B). On slides 5 to 7, the largest item in these supplementary estimates, the $99.8 million, is funding for the Emergency Management Assistance Program. The department will be using this funding to cover response costs associated with the 2018 spring flooding, wild fires in places such as B.C. and other emergencies such as tornadoes, as well as the recovery costs, including the repair and restoration of critical infrastructure in these communities.
On slide 8, the second-largest item is $70.3 million to reform First Nations Child and Family Services. This amount, combined with the $293 million through the budget implementation vote, brings the total additional funding in this program to $363.3 million in 2018-19. This funding will be used to accelerate reform of the First Nations Child and Family Services program through investments in agencies and service providers, and to implement recent orders from the Canadian Human Rights Tribunal.
The third item is on slide 9. It is $64.4 million to advance the new fiscal relationship with First Nations. This funding will be used to better support First Nations communities, as well as the co-development and implementation of the new fiscal relationship with First Nations.
Indigenous Services Canada is preparing to implement a new grant offer, effective April 1, 2019. Over 250 First Nations expressed interest in the grant, and over 100 are expected to receive an offer.
[Translation]
The fourth item explained on slide 10 will provide $37.5 million for the transformation of First Nations elementary and secondary education programs, which will be implemented under a two-phase approach. The first phase is the implementation of annually updated, data-driven, interim regional funding formulas; and the second phase is the negotiation of regional education agreements. Regional funding formulas are being finalized to ensure implementation and allocation processes are in place for April 1, 2019.
[English]
Indigenous Services Canada is also requesting $31.7 million for internal support services, as shown in slide 11. This funding is intended to stabilize Indigenous Services Canada operations and to ensure that programs and employees are supported at capacity to allow for the transformation of services and renewed relationships with Indigenous peoples.
Prior to the machinery-of-government announcement to create Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada as distinct departments, internal services represented 3.2 per cent of total program funding. This additional funding, even after factoring the inclusion of the First Nations Inuit Health Branch, brings the internal services portion to 2.3 per cent.
Also included in the supplementary estimates is the transfer of $53.9 million for reallocation of funding to Lands and Economic Development and Individual Affairs programs under Crown-Indigenous Relations and Northern Affairs Canada. Funding levels of both departments will be adjusted once the transformation is finalized and any future transfers of programming between the two departments are completed.
[Translation]
The remaining slides provide information pertaining to additional key initiatives, on slides 2 to 18, as well as updates on the budget 2018 initiatives that are being accessed through the budget implementation vote, on slides 19 to 21.
[English]
Mr. Chair, the supplementary estimates will enable us to continue to make concrete steps to address the needs of Indigenous peoples.
[Translation]
My colleagues and I look forward to discussing any aspects of the estimates with you and welcome your questions regarding my presentation.
The Chair: Thank you, Mr. Thoppil.
Mr. Lakroni.
[English]
Alex Lakroni, Chief Finances, Results and Delivery Officer, Crown-Indigenous Relations and Northern Affairs Canada: Thank you, Mr. Chair and honourable senators, for inviting us today to discuss the 2018-19 Supplementary Estimates (B) related to Crown-Indigenous Relations and Northern Affairs Canada. I acknowledge that we come together on the traditional territory of the Algonquin people.
As you have noted, I have with me Eric Marion, Senior Director, Senior Director Fiscal Policy, Policy Development and Coordination Branch, for Treaties and Aboriginal Governments for the department.
The proposed funding in Supplementary Estimates (B) continues to build upon the investments that have already been made to accelerate progress toward self-government and self-determination agreements based on new policies, laws and operational practices.
Supplementary Estimates (B), in terms of proposed funding, represents initiatives totalling $174.9 million in funding, which will bring the total appropriations for CIRNAC from $4.9 billion to $5.9 billion for the fiscal year 2018-19. This funding is comprised of two components: $112.8 million for new funding and $62.1 million for net transfers from various government departments, including ISC.
The funding would allow the government to continue to take concrete steps to accelerate the renewal of nation-to-nation, Inuit-Crown and government-to-government relationships between Canada and First Nations, Inuit and Metis, based upon recognition of rights, respect, cooperation and partnership to support Indigenous peoples’ vision of self-determination and advance the work in the North.
The largest portion of this funding is in vote 10, grants and contributions, with a total of $105.8 million. These funds are largely for the Métis Nation Housing Strategy and Métis National Heritage Centre, and the transfer from Indigenous Services Canada. I will touch upon these two initiatives.
Funding of $48.4 million is an investment to support the Métis Nation Housing Strategy and for the construction of the Métis National Heritage Centre by 2020 in the historic Upper Fort Garry in Winnipeg. This investment is intended to reduce the Métis Nation core housing gap by 50 per cent by 2028-29 and represents a deep commitment to reconciliation with the Métis Nation by supporting them in the management of their own culture, art and history toward ensuring their rightful place in Canadian history.
Funding of $53.9 million is a transfer from the Department of Indigenous Services Canada for reallocation of funding from programs under ISC to Lands and Economic Development and Individual Affairs programs under CIRNAC, as my colleague just mentioned.
As for vote 1, the department is seeking $68.9 million, of which the majority pertains to $57 million of out-of-court settlements. These eliminate the liability and advance Canada’s overall commitment to reconciliation in a balanced way that respects the rights of the First Nations and all Canadians.
Also, vote 1 includes $4.9 million for internal support services to stand up Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada as departments. This investment is intended to stabilize the operations of the two new organizations as a first step in ensuring programs and employees are supported with sufficient capacity to allow for the transformation of services and a renewed relationship with Indigenous peoples.
[Translation]
In terms of results, Canada’s engagement through over 75 recognition of Indigenous rights and self-determination discussion tables brings greater flexibility to negotiations and provides a place to explore new ways to reach agreements that will recognize the rights of Indigenous groups and advance their unique visions of self-determination. It was through a discussion table that a special claim under the Williams Treaties in support of the resolution of the Alderville case was reached.
Through the permanent bilateral mechanisms, the department has supported a transformative change in joint priority setting with the Assembly of First Nations, Inuit Tapiriit Kanatami and the Métis National Council. This changed approach has led to progress, such as the co-developed Métis Nation Housing Sub-Accord, signed in July 2018.
Mr. Chair, these estimates will enable the department to deliver on its priorities and to emphasize sound financial management and the efficiency of its operations and administration.
We look forward to discussing these estimates with you and welcome your questions regarding this presentation. Thank you.
The Chair: Thank you.
[English]
Senator Marshall: Thank you very much. My first question is for Mr. Thoppil with Indigenous Services Canada.
The funding for First Nations Child and Family Services, the $290 million that was in vote 10, has it been drawn down?
Mr. Thoppil: That is correct.
Senator Marshall: Has it been spent?
Mr. Thoppil: That is correct.
Senator Marshall: This is an additional $70 million?
Mr. Thoppil: Right.
Senator Marshall: It’s for First Nations Child and Family Services, so it is not just children; it’s for families, too. Do the children have to be within a certain age range?
Mr. Thoppil: Thank you, senator, for the question. I’m going to ask my colleague Odette Johnston to respond.
Odette Johnston, Director General, Children and Families Branch, Indigenous Services Canada: Yes, it is for both First Nations children and for families. The program is designed to address child protection but also to keep children in families and communities. A lot of the measures with the program are not just on the protection side but also on the prevention side and trying to work with both families and children.
Senator Marshall: If we’re looking at the population to which this funding applies, how many First Nations children would be eligible for this bundling? What’s the total population of First Nations children?
Ms. Johnston: I would have to get back to you on that. I do know, in terms of the numbers of children in care, our last figures were about 9,000.
Senator Marshall: So this program would apply to those 9,000 children and their families?
Ms. Johnston: That’s correct, but also for those outside of care.
Senator Marshall: That’s informative. Thank you very much.
The $31.7 million for internal support services, what is that for? Is that for staff? What would be included in that?
Mr. Thoppil: There are two components to that, senator. One is to create internal services capacity to support the programs to deliver their supports to Indigenous people, so finance, HR, IT, corporate secretariat and communications. When you create a new department, those are the requisite organizational supports that programs would expect in order to assist them in the delivery of programs. That’s one component.
The other component is much like what we call transition costs. Those are associated with primarily IT when you have to restructure IT systems for integration between different applications, such as the systems that came from the former INAC as well as the First Nations Inuit and Health Branch, and ensure they are integrated together. When you create a new department, you have to create new financial systems with SAP, as an example, or a funding agreement system.
Senator Marshall: What would be the breakdown between staff and non-staff? How much of the $31 million would be for new hires?
Mr. Thoppil: It would be approximately 100 FTEs for that amount of money.
Senator Marshall: What is the average cost? Is it $100,000?
Mr. Thoppil: It is less than that. It is about 70 to 80. That would probably exclude employee benefit plans and then, of course, all the requisites, what I would call charges that come commensurate with FTEs, such as for PSPC accommodation. There are Shared Services Canada charges that are aligned with every FTE added to the administration.
Senator Pratte: I will follow up on Senator Marshall’s questions. I want to understand this $32 million and the 4-point-something million in the other department. Are these recurrent expenses, or is it just the one time? If they’re employees, I suppose they’re recurrent expenses?
Mr. Thoppil: Correct, senator. I had tried to respond to Senator Marshall’s question by talking about the amount of money in two pillars. The first pillar is ongoing, as you’ve noted, related to staff. The other amount is transition, and that’s a three-year transitional element.
Senator Pratte: You mentioned in your opening comments that the $32 million was compensated by movement of funds in the other direction?
Mr. Thoppil: No.
Senator Pratte: Is this the cost of splitting the department, or do you expect that we will be asked for more money under the support funds in the future?
Mr. Thoppil: At this point in time, these are the funds that the government has allocated to us in order to create the department. I can’t foresee what happens in the future, but we are proceeding, both departments, in organizing the internal services with the funds that the government has bestowed, including this amount in Supplementary Estimates (B), senator.
Senator Pratte: I’m trying to understand how both departments allocated — I’m not sure that’s the right word — the different responsibilities. I understand very well what the names of the new departments mean, but, for instance, on one side there is funding for transformation of education in most Indigenous communities, but Crown-Indigenous Relations is asking for money for education for the Inuit, I think. I’m wondering how the different responsibilities were allocated, because it seems like some of these things are similar.
Mr. Thoppil: I can start on the Indigenous side and look to my colleagues from Crown-Indigenous to supplement.
As you know, senator, the strategic mandate of Indigenous Services Canada is to provide high-quality services to Indigenous peoples and also to work with them to advance their self-determination through the devolution of those services to them. We make reference to the notion of strategic obsolescence whereby we will have transferred, at some point down the road, those services to the full control of Indigenous peoples to deliver for themselves as they see fit. So that is our remit.
We do provide funding for programs and services and direct delivery to First Nations and the Inuit. That primarily takes place with the Inuit on the health side.
I’ll let CIRNAC speak for their delivery with the Inuit.
Mr. Lakroni: As for CIRNAC, the mandate is clear from our perspective in terms of advancing nation-to-nation, Inuit-Crown and government-to-government relationships, supporting Indigenous people’s vision to self-determination and leading the work in the North.
As for the specific education aspect, I will turn to my colleague Eric to elaborate.
[Translation]
Eric Marion, Senior Director, Fiscal Policy, Policy Development and Coordination Branch, Treaties and Aboriginal Government, Crown-Indigenous Relations and Northern Affairs Canada: Good morning. With the self-government agreements —
[English]
— what we are trying to do is in line with what Mr. Thoppil was indicating, develop our program for Indigenous groups so they can manage their affairs, manage a global program and determine how they wish to deliver those services.
We have concluded a number of self-government agreements. You will have seen in Supplementary Estimates (B) that there is additional money to going to a Mi’kmaq group in the Atlantic to support their self-government agreement around education. CIRNAC manages the overall relationship with the self-governing groups, various departments where a self-governing group is exercising program delivery with respect to that field or area. We draw down the funding for the department and transfer it to self-governing groups through a grant agreement.
Senator Eaton: There is so much to ask and so little time.
I see, Mr. Lakroni, that the Metis have $48 million for housing, which is very exciting. The last time you were here, I was asking you about Inuit housing, and I appreciate the detailed answer you got back to the committee with. But, as you know, there is a severe shortage of housing for Inuit, and 4,000 units are needed alone in Nunangat, for example. With overcrowding, addiction and violence, a lot of that comes to the terrible housing up there, which we saw in September.
I see that only 400 new units were constructed through the department and CMHC as a result of Budget 2016. I see all this money going for support for international feminist programs, and yet I see our own Inuit living in third world, fourth world poverty. Do you have a long-term scheme to get this going a little faster?
Mr. Lakroni: Thank you for the question. Inuit housing is a high priority for our department and for the government. The funding was allocated in both Budget 2016 and Budget 2018. This initiative is premised on a self-determination approach and gives the Inuit recipient the responsibility for decision-making powers and capacity to address their housing needs.
Senator Eaton: So last year when you only built 40 new houses and there are 3,000 needed, you don’t feel it’s a crisis of any kind? We are just going to proceed slowly along forever on this pace?
Mr. Lakroni: The spirit of the program is to work with the communities, to meet their housing needs and bridge the gap by significantly —
Senator Eaton: Yet, when we go up there and listen to the communities, that’s not what we are hearing.
I’m sorry to put you in that position. So you don’t, as a department, have a scheme to move ahead more quickly.
In the funding to advance the new fiscal relationship with First Nations, $64.4 million, the outcomes seem wonderful. Budget 2018 investments will strengthen governance capacity and reinforce the accountability of First Nation leaders to their citizens, which is wonderful. Self-government is wonderful. Can you reinforce the accountability in any way, or are those just lovely words on a page?
Mr. Thoppil: Thank you, senator for the question. Part of the co-development with the Assembly of First Nations as well as the First Nations Financial Management Board, and validated through cross-country engagement with First Nation communities, is to proceed on a path of financial autonomy for those who have the capacity and the standards to achieve that. Those are, in part, based on FNFMB standards, which are based on two pillars, senator. One is five-year financial performance ratios and a history of them to see whether they have met those ratios. The second pillar is implementation of a financial administration law that talks about some things which are very basic and important for governance, such as an independent finance and audit committee, elements of internal controls and systems.
Senator Eaton: Does that mean off nation, or does that mean the nation or community itself does its own audit?
Mr. Thoppil: It’s a finance and audit committee. There would be an independent committee of chief and council for which the finances are tabled by their external auditor. It would be a platform if they had internal auditor come to that committee to present the results of their internal audit testing.
That standard was worked out by the First Nations Financial Management Board with investment bankers and credit rating agencies as part of that ecosystem of support to enable a First Nation to tap into the First Nations Finance Authority to leverage international financing at a much lower rate than commercial financing. What we have done with those standards is that if First Nations are able to achieve those two pillars, they should be able to get a funding arrangement for their core services on a grant basis.
Now, we all know that First Nations are at different levels of capacity, so the high capacity ones are the ones that will be able to achieve those two standards of the First Nations financial standards board fairly readily. But we do acknowledge that there are a number of First Nations out there who aspire to achieve that but need help to get there. That is why there is about $40 million of that $64.4 million, in terms of capacity supports, for those First Nations who aspire to get there. And, of course, we want to help them get there because we can all take more comfort in the funding that we give to those First Nations, in terms of ensuring that they design programs and services in response to local priorities but in a primarily financial and accountable manner.
Senator Eaton: Thank you.
Senator Boehm: I also wanted to follow up on co-development of the new fiscal relationship between Canada and First Nations. With our last panel, we had a discussion on the 2030 Sustainable Development Goals and the agenda which ESDC is coordinating for the government internally, because all members of the UN have signed on to look at their own internal implementation.
As we move forward on the co-development of the fiscal relationship, how much and which, if you can say, SDGs fall into this? And are you using the Sustainable Development Goals as a guideline as you move ahead?
Mr. Thoppil: Thank you for the question. We are actually counting on using the UN SDGs as a basis for co-development of performance indicators that will allow us to input into Canada’s response to UN SDGs. Due to the history of lack of trust between Canada and Indigenous peoples and the history of the department imposing top-down performance indicators for which First Nations would have no choice but to report on, we have co-developed using the UN SDGs as a safe and more credible space and basis for the creation of the performance indicators they will use going forward.
So we are co-developing right now, in response particularly to the last Auditor General’s report on reporting of the socio-economic gap, the production of a national outcomes framework, which is essentially based on the UN SDG indicators.
Senator Boehm: So you would be reporting to ESDC in that sort of centralized role.
Mr. Thoppil: That’s correct.
Senator Boehm: Thank you.
The Chair: I know that Senator Marshall has to leave.
Senator Marshall: Where is the new legislation for the two departments?
Mr. Thoppil: It’s still subject to discussion with the government, senator.
Senator Marshall: And no target date?
Mr. Thoppil: No target has yet been established.
Senator Andreychuk: From a legal perspective, where does the authority then come for the separation if we haven’t got the act in place and we don’t know the responsibilities? How do you operate?
Mr. Thoppil: Thank you, senator, for the question. We do operate through the order-in-council that the Prime Minister published, and that comes under a legislative act. It underpins the issuance of that order-in-council. There are a number of departments who do operate on an order-in-council without a legislative frame, so it’s not unusual. Ideally, it would be nice to have a legislative frame in order to solidify to the Canadian public both its mandate and its powers and duties, but we are not yet there in the transformation.
Senator Andreychuk: There are, somewhere, descriptions for the two departments. You are working separately now but cooperatively, I hope. Where could we go to find out who does what in which department? That’s the first thing.
I asked the first question: It’s going to cost more to separate. At the start we heard, “Well, no, it’s just a transfer of duties.” We are now seeing that the figures are mounting.
Where would we go to find out how this is operating so that we know the actual cost of separating these two as opposed to providing better service? I want to look at the cost first. Then I’ll throw all the questions at you so you can answer them. That will take up two minutes.
The other part of that problem for me is that when we talk about helping self-government manage them, capacity building, strategic divisions and all this, I have heard that for about 50 years. What I’m concerned about is how much is being spent on administration, salaries within those two departments, and how much is actually going into program benefits on the ground? Is there any way I can track that? I keep hearing we are moving towards self-government, but when I try to find that out on the ground, living in Saskatchewan, the feedback is that the programs haven’t changed. I’m particularly interested in child welfare. That was my field. The things we were saying 40 years ago are still being said: “We’re going to do this, we will help, we will manage.”
Where do I go to find out how much is being churned in administration meetings, debating, and how much is actually hitting the ground in programs? I want to trace value for money. That’s the question they keep asking me.
Mr. Thoppil: Senator, as you know, every department tables with Parliament a departmental plan and departmental performance report. Those are the accountability underpinnings to both Parliament and the Canadian taxpayers for what is transpiring in terms of which programs are the responsibility of the department and how those monies are allocated and expensed. It is a very good read in terms of what is happening, including on the transition.
The other point is that we would be happy to provide to the committee a breakdown of the administration costs. As we discussed at our last appearance, embedded within our vote 1 is the administration costs. There are a number of other things that are in vote 1 at least for Indigenous Services. For example, nurses on reserve are also there, the non-insured health benefits. We can unpack vote 1 to indicate for you the component of Indigenous Services that is administration.
Mr. Lakroni: As for clarity on the mandate, I would mention that there is the possibility of referring to the mandate letter from the PM to respective ministers, and the commitment to collaborate between the two departments is central in terms of our relationship and operations.
[Translation]
Senator Forest: Thank you for your testimony.
I’d like to clarify something. There are very few weeks remaining in the 42nd Parliament. If the bill that must officially designate each of your departments’ responsibilities does not pass, would things carry on based on your mandate letter? What would it mean for the effectiveness and efficiency of your organization if the bill does not pass before the 42nd Parliament is prorogued?
Mr. Lakroni: I thank the honourable senator for his question. As my colleague said, an order-in-council has been approved, based on the legislation. We operate based on guidelines, but the legislation, which is currently in progress, is certainly important and sets clear limits. We unfortunately do not have a date, but I understand the question.
That said, the two organizations operate with clear mandates, and we are working together very closely because we have similar mandates, one of which is focused on services and the other is focused on the relationship with Indigenous First Nations. We want to continue to collaborate at this level.
Senator Forest: I have a second question.
With respect to the National Inquiry into Missing and Murdered Indigenous Women and Girls, Commissioner Audette pointed out that it is important to create a follow-up process to validate the government’s actions. Do you plan on following through on that recommendation?
[English]
Mr. Thoppil: Thank you, senator, for the question. As you will see in the supplementary estimates, there are elements that we are responding to with regards to the interim report. So you will see in the supplementary estimates some of the recommendations that we are seeking funds for in order to provide mental health supports and counselling to individuals that are there. You will see through past supps and future supps a determined effort to respond in order to provide the requisite supports.
[Translation]
Senator Forest: Is there nothing specific on that? There is an overall budget, but no specific actions in that area?
[English]
Mr. Thoppil: The intent is to respond to each of the recommendations as they come forward.
[Translation]
Senator Moncion: My question is on reporting. There is funding for the administration of all program offices, but there is also money that is directly transferred to Indigenous groups to help them develop their self-determination, their programs and so on.
Can you tell us about the type of reporting you require, so you can track this funding and ensure that the programs are implemented and progress is made on the initiatives?
[English]
Mr. Thoppil: Thank you, senator, for the question. We do work closely with Indigenous groups to ensure that the funding agreement terms and conditions are respected. We work with them through our regional office network. If they need help, we provide the requisite supports in order to ensure that those that aren’t autonomous are delivering the services to the extent they can. That’s a daily issue that we work with, and that’s part of what Indigenous Services is all about.
Senator Moncion: But what kind of report back do you receive? Because you have to follow the trail where the money goes. What do you receive in exchange for — and “exchange” might not be the right choice of words. How do you follow the money?
Mr. Thoppil: We follow the money through a number of ways. There are a number of reports by program that First Nations need to respond to, to the extent that First Nations actually claim that there is a reporting burden in terms of the amount of data we collect. We also collect financial statements, and we do financial statement reviews on a periodic basis.
Then, of course, on a sample basis, we, together with our departmental audit committee, develop an annual recipient audit plan, whereby we send in auditors to recipients to look at the financial affairs of the First Nation to see whether they respected the terms and conditions of the funding agreement. That’s just one example.
If First Nation community members feel they are not getting services and that there are issues of malfeasance and so on, then depending upon the evidence, perhaps from time to time we will send in forensic auditors to validate that. When we do find an issue of their non-respect of the terms and conditions, we have a variety of ways to help them remediate that under the default prevention and management policy at the department, which is embedded in the funding agreement.
Senator Moncion: Thank you.
Senator Klyne: My question is for CIRNAC. With regard to the $1.4 million request for First Nations fiscal institutions, my understanding is that these institutions fall under the First Nations Fiscal Management Act and would cover the First Nations Financial Management Board, the First Nations Tax Commission and the First Nations Finance Authority. It’s also my understanding that Budget 2018 proposed $50 million over five years for this purpose and $11 million per year ongoing to strengthen First Nations fiscal institutions. Total funding for this 2018-19 initiative is $7.4 million.
If that is a backdrop, which fiscal institutions will receive the monies under this $1.4 million request, and who presides over that and determines which of those three would receive any monies?
Mr. Lakroni: Thank you for the question, senator. You are right in terms of the $1.4 million and $6 million, but these amounts are supplementary to the amount that is initially embedded in the Main Estimates, which is $12.3 million. When you add all the pieces together, the Main Estimates money plus the supplementary estimates money, you’re looking at $19.7 million to support these fiscal institutions for First Nations. That’s just in terms of setting the context. The same amount is sustainable for at least the next four years — $21.9 million for next year, $23 million following and ongoing.
Senator Klyne: Could the committee get an overview reconciling all those numbers? I see at 2018-19, $7.4 million in the budget. Why is the funding included in this Supplementary Estimates (B), the $1.4, and why wasn’t it just part of the $7.4 in the vote 40 budget implementation?
You mentioned a whole bunch of other numbers that I had no idea about, so I’d like to see how that all comes together under the First Nations fiscal institutions.
The Chair: Can you please provide to the clerk what has been requested by Senator Klyne?
Mr. Lakroni: We will, yes.
The Chair: Following what I have heard from Senator Klyne, I have to say, being the son of a single mother and born on welfare, and as a former Minister of Family and Community Services for the Province of New Brunswick, I have always been concerned by the number of children in foster care. Following what I have heard from senators, let it be that we touch housing, education or families.
According to a Statistics Canada report, Aboriginal children across our land represent 7 per cent of all children, and of those 7 per cent of children across our land, 48 per cent are in foster care.
Can you share with us and tell us, in the last 10 years, have we had any improvement, or is it just continuing to grow?
Mr. Thoppil: Thank you, chair, for the question. I’m going to turn it to Odette, who is responsible for the program, to answer your good question.
Ms. Johnston: Thank you for the question. We are very concerned about the numbers of Indigenous children in care. Within the department, I’m sure you are aware that we have been subject to a human rights complaint. As a result, the department is trying to address the system that has been broken. We are working in collaboration with our partners to try to come up with a new funding approach to address First Nations children in care.
It’s not going to be an easy road to try to fix this, but we have invested a fair amount of resources, I would say, over the last few years. We are trying to ensure that those resources go toward prevention, and keeping children and families together in their homes and in their communities.
With the initial investments in prevention, I think you are going to see that the numbers will increase, because families become aware of the systems that are available for them. But I think we are starting to see some changes occurring out there, where communities are decreasing the number of kids in care. So I think we will see a change.
I also want to add that we have to work with provinces, because provinces are responsible for the child-and-family jurisdiction right now. We are bound by the legislation and standards of provinces and territories. Some of the Indigenous kids are served by provinces, so we have to work together. That’s what we are aiming to do.
The Chair: Can you provide us with a graph regarding what, in the last 10 years, has happened to our children? For all the questions we are asking here, there is a human face to those numbers. If both of you could provide us that, please.
Next is Senator Forest-Niesing.
Senator Forest-Niesing: Thank you all for being here, and thank you for your testimony. My question is for Indigenous Services Canada.
[Translation]
My question is for Indigenous Services Canada, which is requesting $37.5 million for the transformation of First Nations elementary and secondary education programs. The purpose of this commendable initiative is to achieve educational outcomes similar to those attained by other Canadian students from the same province. In its 2016 Budget, the government proposed substantial funding over five years to support the transformation of the First Nations education system.
First, I would like you to comment specifically on the issue of the concrete improvements that have been made since 2016 and on the perceived trend, and second, I would like you to tell me where we are in the transformation process.
[English]
Ms. Johnston: Thank you, senator. There were a number of investments in 2016 towards K to 12 education for First Nations on reserve. Prior to my coming back into child and family services, I was working in education partnerships. I’m aware that we have been making progress. Over the past couple of years, we’ve actually entered into a couple of agreements for First Nations school boards — one in Manitoba and one in Alberta — where the First Nations have assumed control and instituted their own school boards. We’ve also continued to invest in programs like the First Nation Student Success program that’s addressing literacy. I believe the capacity of First Nations is increasing in the education area.
With these latest investments we’ve had that are part of these particular estimates, we’ve also negotiated the first ever regional education agreement in British Columbia, the BC Tripartite Education Agreement. That is an interesting agreement because it was a partnership with the province, the First Nations and the department to try and address First Nations children not just on reserve but also those who attend provincial schools.
We’re starting to see improvements in those and I think this is a good start towards that. The additional investments here will go towards helping educational organizations in other regions try and move towards that as well.
[Translation]
Senator Forest-Niesing: I would also like to ask a brief question that may require a longer response. With respect to Crown-Indigenous Relations and Northern Affairs Canada, we haven’t discussed the largest amount in the funding request, which hovers around $57 million and involves negotiated, out-of-court settlements.
Could you shed some light on the types of negotiated settlement agreements this funding would go to?
Mr. Lakroni: Thank you for your question. I’ll try to be brief.
As you know, we prefer to settle disputes out of court for several reasons. This is the spirit in which we work with First Nations. First, the process is more respectful; second, it’s fairer; and third, it costs less in terms of legal fees and so on. We prefer using the funding available where it can do the most good, rather than spending it on the legal system.
Two key disputes have been settled. The first involved the Akwesasne Mohawk First Nation and it dealt with all matters pertaining to the construction, use and operation of the St. Lawrence seaways, as well as everything related to hydroelectric power, namely hydroelectric projects and the Cornwall International Bridge. We went through several years of negotiations and we were able to reach an agreement for a $45-million settlement. The second dispute had to do with the payment of a settlement —
[English]
— against Canada for breach of fiduciary duty, not maximizing the proceeds from sale of land. We have negotiated a settlement, which has been going on since early 1900, and the settlement is about $12 million. The total of these two settlements is the $57 million that we see in the estimates.
[Translation]
The Chair: Thank you, Mr. Lakroni.
Senator Eaton: I have a brief supplementary to follow up on Senator Mockler’s question about the children in foster care.
[English]
Is cultural accommodation being taken into consideration? I’m thinking of children being moved hundreds of miles to be fostered. Are they staying within a culturally appropriate setting of some kind?
Ms. Johnston: Thank you for the question. With the investments there is very much a focus on prevention and intervention in trying to keep the families in the home and in the communities and to absolutely respect the cultural identities. I think there is a recognition that in order to help these kids we need to do that. The agencies are very much working on that, but not just agencies; communities are also getting funding to support that type of approach.
Senator Eaton: Thank you.
The Chair: To Mr. Thoppil and Mr. Lakroni and their teams, thank you very much.
(The committee adjourned.)