Proceedings of the Standing Senate Committee on
National Finance
Issue No. 88 - Evidence - February 26, 2019 (afternoon meeting)
OTTAWA, Tuesday, February 26, 2019
The Standing Senate Committee on National Finance met this day at 2 p.m. to study the supplementary estimates (B) for the fiscal year ending March 31, 2019.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Good afternoon. My name is Percy Mockler, and I am a senator from New Brunswick and chair of this committee. I welcome everyone in the room and all Canadians watching us on television or online.
[English]
As a reminder to those watching the committee, hearings are open to the public and also available online at sencanada.ca.
[Translation]
I would like to ask the senators to introduce themselves, starting on my left.
Senator Forest: Éric Forest from Quebec, the Gulf region.
Senator Pratte: André Pratte from Quebec.
Senator Forest-Niesing: Good afternoon and welcome. Josée Forest-Niesing from northern Ontario.
[English]
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario, Toronto.
The Chair: Thank you.
I would like to recognize the clerk of the committee, Madam 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.
Today our committee is continuing its studies on the expenditures set out in the Supplementary Estimates (B) for the fiscal year ending March 31, 2019.
[Translation]
Honourable senators, 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 the funds requested in the Supplementary Estimates (B), and this afternoon we will hear from an additional four of them.
In the first hour we welcome the Department of Finance Canada, Madam Darlene Bess, Chief Financial Officer; and also Mr. Richard Botham, Assistant Deputy Minister, Economic Development and Corporate Finance Branch.
From Immigration Refugees and Citizenship Canada, we have Mr. Daniel Mills, Assistant Deputy Minister and Chief Financial Officer, Corporate Management; and to accompany Mr. Mills we have Mr. Mike MacDonald, Associate Assistant Deputy Minister, Operations.
Thank you, witnesses, for being here. I was informed that Madam Bess will be making a short presentation to be followed by Mr. Mills. Following your two presentations we will have questions from the senators.
[Translation]
Ms. Bess, go ahead.
Darlene Bess, Chief Financial Officer, Department of Finance Canada: Good afternoon Mr. Chair and honourable senators. As chief financial officer, I am the lead executive responsible for financial reporting and the disclosure of the 2018-19 Supplementary Estimates (B) for the Department of Finance.
With me today are officials to assist in providing you with a more in-depth perspective on the rationale and policy that support the numbers within these estimates.
[English]
The Supplementary Estimates (B) reflect a net increase of $4.1 million in departmental budget expenditures stemming from forecasted increases of $3.3 million in Vote 1 program expenditures and a net increase in statutory spending of $0.8 million. Given these increases, the total proposed authorities to date for the department are $94.5 billion.
[Translation]
New vote 1 program funding requirements of $3.3 million are related to:
[English]
$884,956 for review of opening banking; $781,416 supporting tax policy, analysis and development; $750,000 for legal costs associated with financial sector policy development and implementation; $385,063 for policy work related to pricing carbon pollution and supporting clean growth; $226,089 for trade dispute policy and administration; $175,000 for membership fees for international anti-money laundering organizations; and $80,840 for the permanent advisory committee on the charitable sector.
[Translation]
Statutory items are displayed in these supplementary estimates for information purposes and will not be part of the supply bill. They are included to provide a more complete picture of total expenditures.
Within the statutory forecast, the contributing factors to the $0.8 million increase are as follows:
[English]
A $105 million increase in other interests costs, a $99 million increase for payments to the Canada Infrastructure Bank, a $23,379,000 increase in additional fiscal equalization to Nova Scotia, a $329,862 increase for contributions to the employee benefit plan, a $3 million decrease for the purchase of domestic coinage, a $9,167,000 decrease to youth allowance recovery, a $76,762,000 decrease to alternative payments for standing programs and a $138 million decrease interest on unmatured debt.
[Translation]
Supplementary estimates (B) also include an increase of $348.5 million for non-budgetary expenditures planned for 2018-19. These are related to: $100 million potential payment to provide financial assistance to the World Bank Group in support of the Multilateral Development Bank Infrastructure Loan Refinancing Facility Initiative; and $248.5 million payment to the International Bank for Reconstruction and Development for the purchase of shares under the Bretton Woods and Related Agreements Act.
[English]
This concludes my overview of the Supplementary Estimates (B) for the department. We would be pleased to answer any questions the committee members may have. Thank you.
[Translation]
The Chair: Thank you, Ms. Bess.
Daniel Mills, Assistant Deputy Minister and Chief Financial Officer, Corporate Management, Immigration, Refugees and Citizenship Canada: Good afternoon Mr. Chair and honourable senators.
[English]
My name is Daniel Mills and I’m the Assistant Deputy Minister of Corporate Management Sector and Chief Financial Officer at Immigration, Refugees and Citizenship Canada. I’m pleased to be here to present the Supplementary Estimates (B) on behalf of the department along with my colleague Mike MacDonald, Associate Assistant Deputy Minister of operations.
For fiscal year 2018-19, IRCC is seeking a proposed net increase of $192 million in resources. The largest part of this increase, $114.7 million, is to support increased volumes of asylum seekers.
[Translation]
This is comprised of an additional $100 million that the Government of Canada has earmarked for provincial governments this fiscal year, as we continue to assist provinces and municipalities with cost-sharing for the provision of temporary shelter spaces.
[English]
Also, $14.7 million is related to the federal government provision of temporary interim lodging sites near the Canada-U.S. border as well as the procurement of hotels in the Greater Toronto Area.
Also included in the estimates is an increase of $69.2 million in funding for the Canada-Quebec Accord on Immigration. Under this accord, we continue to work collaboratively with the Government of Quebec on immigration and settlement issues.
[Translation]
This adjustment is to provide an updated amount for the annual grant provided by the Government of Canada, to support settlement and integration services in Quebec. This will bring the total funding of the accord to $559.4 million in 2018-19.
[English]
To further expand biometric screening in the immigration system, $4.6 million is also included in the Supplementary Estimates (B). This is not new funding, but rather a reprofiling of funding from previous years to better match plan expenditures under this initiative.
[Translation]
Expanding our biometrics program will enable us to quickly and accurately establish more travellers’ identities, helping us to facilitate entry into Canada while we protect the safety and security of Canadians. I should also note that a key feature of this expansion is that temporary resident applicants will only have to provide their biometrics once every 10 years.
[English]
These estimates also include $3.2 million to fund the 2018-20 multi-year immigration levels plan. This is also a reprofiling of existing funding to better match plan expenditures. Under this plan, the government will gradually increase the number of permanent residents that Canada welcomes annually.
[Translation]
The 2018 immigration levels plan increased admissions to 310,000 permanent residents and the funding being sought in these estimates was previously approved, but yet to be accessed. This funding is required to achieve levels targets and is for activities such as application processing and corporate support.
[English]
Finally, IRCC is requesting an additional $267,245 to write off the uncollectible loans. Loans are provided to resettle refugees, including government-assisted refugees and privately sponsored refugees.
[Translation]
The majority of these loans were provided to government-assisted refugees for transportation and resettlement assistance. And I should note that the loan recovery record for these loans is 91 per cent.
Honourable senators, I trust that I have provided a general overview of Immigration, Refugees and Citizenship Canada’s supplementary estimates (B) in sufficient detail. I’m happy to respond to any of the honourable senators’ questions regarding any of these figures.
Thank you for listening to this presentation.
The Chair: Thank you, Mr. Mills.
[English]
Since we’ve had great consensus this morning, we will continue to apply our four-minute rule.
Senator Marshall: My first question is for Ms. Bess. I was looking in the Supplementary Estimates (B) for something that I don’t think is there. During the fall fiscal update, there was an item in one of the schedules which provided funding for the net fiscal impact of unannounced measures. The amount applicable for 2018-19 is $1.7 billion.
Will that be spent this year? I haven’t seen it in a supply bill.
Ms. Bess: Could you please repeat that? It is $1.7 billion?
Senator Marshall: It’s called the net fiscal impact of unannounced measures and, over six years, it is $9.5 billion.
Richard Botham, Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance Canada: I believe you are referring to a list in the Fall Economic Statement of funding decisions taken.
Senator Marshall: Not announced?
Mr. Botham: Right, but my colleague from fiscal policy could be more precise.
Senator Marshall: It looks like it’s supposed to be spent in this fiscal year because it shows up in the column for this fiscal year, so I was expecting to see it in Supplementary Estimates (B), but it is not there. I’m wondering what it is and where is it?
Nicholas Leswick, Assistant Deputy Minister of Fiscal Policy, Department of Finance: It is an item in that amount that was planned from a budgetary perspective for planned spending across government. It is not particular to the Department of Finance. It was not disclosed by line item in the Fall Economic Statement because of, at that time, cabinet confidences, ongoing commercial sensitivities, commercial contract negotiations, trade sensitivities and other things that could not be disclosed by line item in the fall statement.
It would be expected to flow through, either in part through an estimates document in a department — in any department, not particularly to the Department of Finance — or perhaps it flows through directly within the public accounts process. It does not necessarily require an appropriation to be expensed.
A good example would be a settlement that arrived with a First Nations group where perhaps there was a previous item in the balance sheet, which is effectively adjusted during the public accounts process at year-end to reflect perhaps a greater value.
Senator Marshall: Would it be, for example, a statutory item?
Mr. Leswick: The nature of the budget and the Fall Economic Statement is to reflect items in their expense profiles. They are accrual by nature. Sometimes they don’t necessarily have a cash impact in the year but they might have an accrual impact. You may not see it through an appropriation act or a supply bill.
Senator Marshall: For this $1.7-billion item, can you give us a list of what has gone through for the current fiscal year, even if it is not going through a supply bill? I would like to know what it is, because it doesn’t really say in the fall fiscal update. It just shows the $1.7 billion. I would be interested in knowing what’s in that listing. Was the full $1.7 billion allocated or not? Could you provide that to the clerk?
Mr. Leswick: Yes, we will see what we can do. We may not be able to account for the full amount, because some items still may not be disclosed because of some ongoing confidentiality, but we will make best efforts to have an accounting of that $1.7 billion.
Senator Marshall: For Citizenship and Immigration, Mr. Mills, is the $100 million for grants to provinces like Ontario and Quebec, similar to an item we saw in Supplementary Estimates (A)?
[Translation]
Mr. Mills: Yes, the $100 million will be used to provide provinces and municipalities with financial assistance to help them resolve the situation concerning temporary shelter spaces.
[English]
Senator Marshall: So can you tell us which provinces or municipalities are getting what amount? The last time I think it was $50 million and our witnesses were able to give us the breakdown. Can you give us the breakdown and tell us how it is allocated and what it’s based on? Or is it arbitrary?
[Translation]
Mr. Mills: Currently, the amount has not been broken down by province, but it is an amount available for all the provinces affected by irregular immigration.
We are also currently in discussions with a number of provinces to decide what amount will be provided to each of them for the current fiscal year, 2018-19. That amount will be added to the established $50 million and set aside in the supplementary estimates (A).
Senator Pratte: My initial questions are for Mr. Mills. I would like to continue the discussion about the $100 million. Do you have an idea of how that amount was determined? Was it simply because it was part of the supplementary estimates (A)? It used to be $50 million, and now it is $100 million. Is that because the provinces asked for $100 million?
Mr. Mills: We have had a number of discussions with various affected provinces, including Quebec and Ontario. We have also had discussions with Manitoba and British Columbia. As I said, the amounts have not been determined specifically for each province. We recognize certain provinces’ exemplary contribution to irregular immigration issues, and it was following discussions with them and by analyzing various costs they have incurred over the past two years that we have determined that we could provide an amount of up to $100 million for this year. The amount per province has not yet been established, but we are continuing our discussions with various provinces.
Senator Pratte: Thank you.
I would like to obtain information on the increase and the funding provided under the Canada-Quebec Accord relating to immigration. If I remember that accord correctly, it contains a formula based on federal government spending and the number of landed immigrants in Quebec. In principle, the formula applies, and we get the figures associated with it. Is that amount reflective of the formula or is it a supplement for one reason or another?
Mr. Mills: No, the $69.2 million requested in the supplementary estimates (B) has to do with the Canada-Quebec Accord. That is the formula that applies. There are two components to the accord: the increase in federal government spending from year to year, and the number of non-francophone immigrants settling in Quebec from year to year. That formula is applied, and it leads to an amount. It is really the formula that is applied. There is an increase of $69.2 million for this year.
Senator Pratte: Is this increase coming — and this may always be the case, but I am still relatively new here — through the supplementary estimates (B) because the data required for establishing the formula becomes available during the year?
Mr. Mills: Yes, every year, this increase appears in supplementary estimates (B) because we wait for the final data, which is provided to us in the fall. So the adjustment formula is finalized then, and that is why it is part of the supplementary estimates (B).
Senator Pratte: Would it be possible to send to the committee the evolution of the amounts received by the Quebec government under this accord over the past few years?
Mr. Mills: Certainly, it would be my pleasure to share with the committee the evolution of the Quebec-Canada Accord over the recent years.
Senator Pratte: Okay. Thank you very much.
[English]
Senator Eaton: In the calendar year 2018, there were 19,419 asylum seekers who were intercepted by the RCMP outside of a regular point of entry. In January 2019, there were only 888, almost all in Quebec. That is much lower than the 1,500 in January of 2018.
In response to the increase in illegal arrivals, the federal governmental allocated $173.2 million over two years as part of Budget 2018. The purpose of these additional funds is to manage irregular migration by ensuring security at the border and faster processing of asylum claims.
When the department was here in November, we were told that the backlog to have a hearing for an asylum seeker was 22 months. Has that number changed since? What is it now?
Mike MacDonald, Associate Assistant Deputy Minister, Operations, Immigration, Refugees and Citizenship Canada: The IRB backlog is sitting close to 70,000, if I remember correctly, and the processing time has gone up a couple of months. So around 24 months.
Senator Eaton: If I come across the border illegally tomorrow and I’m sent to Toronto by bus and go through all the biometric stuff, when will I have my hearing?
Mr. MacDonald: That will depend. The IRB have put in specific measures to increase their overall backlog reduction by June of this year by an extra 10,000. So they are hitting over 33,000, plus certain irregular arrivals are getting processed at different speeds, depending on the risk profile that person possesses. They are trying to do a variety of different processing and scheduling rhythms such that they can move through a larger amount of overall asylum claimants, no matter how they come in, in a quicker period of time.
Senator Eaton: If I’m a person who goes through a legal port of entry and claims asylum or if I walk through the woods and I’m irregular, is the wait time the same? To be exact, there are 64,929, of which there are 28,000 irregulars. As well, you have appeals. I think the IRB has 5,736 appeals. So are some people waiting to 2025 or 2026 to have a hearing?
Mr. MacDonald: Some people will wait two years to have a hearing.
Senator Eaton: And not longer than two years?
Mr. MacDonald: Then they may enter appeal mechanisms which could make their cases last much longer. They can also go to the Federal Court.
That said, the IRB has committed, with the additional funding that they received in the budget, to hiring several hundred new employees, many of whom are decision makers, and they have changed the way they schedule. They have tried to use more creative scheduling means to move through a higher number of people, and they have one commitment to do that by June of this year.
So they are making gains. Compared to 2017, they have increased their rate of asylum hearings by almost 95 per cent .
Senator Eaton: They hope to hear about 30,000 or 35,000 a year?
Mr. MacDonald: At a minimum, yes.
Senator Eaton: Thank you.
Ms. Bess, there are two minute numbers here about money laundering on your budget. Funding for membership fees for international anti-money laundering organizations.
Ms. Bess: I can speak to that at a high level, but my colleague Leah Anderson will be able to speak to that at a more detailed level.
This initiative supports Canada’s participation in international bodies such as the Financial Action Task Force to develop standards to deter, detect and prosecute money laundering and terrorist financing globally. It’s to support some of the increasing membership fees for some of these organizations.
Senator Eaton: Have you found them to be effective, Ms. Anderson?
Leah Anderson, Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance Canada: I’m Leah Anderson, the Assistant Deputy Minister of the Financial Sector Policy Branch. As Darlene mentioned, these funds are for three of the international organizations that we are part of, so the Financial Action Task Force, the Asia/Pacific Group on Money Laundering and the Caribbean Financial Action Task Force. They are very effective. These organizations essentially do peer reviews of various countries to ensure they are adhering to standards and also test for effectiveness. They work closely to develop new standards to ensure rules are at the forefront of knowledge of how money laundering is happening. They also do a lot of research on typologies, for example, to help oversight agencies deter and detect.
Senator Eaton: Thank you.
[Translation]
Senator Forest: My question is for Ms. Bess. Some of the additional funding I was optimistic about is the $800,000 to support tax policy analysis and development. The committee wanted to propose in 2017 an analysis of the Canadian tax system, which I think should be fair and competitive with neighbouring countries. In the context of the demographic challenge, it must be efficient for ensuring that people have the services they want to pay for. What specific aspect of tax policy analysis do you want to address? Is it the entire tax policy, and how will you deal with this issue?
[English]
Ms. Bess: Thank you for your question. I would like to invite my colleague from tax policy to come to the table to speak to that, Mr. Miodrag Jovanovic.
Miodrag Jovanovic, Associate Assistant Deputy Minister of Tax Policy, Department of Finance Canada: I am Miodrag Jovanovic, Associate Assistant Deputy Minister of Tax Policy.
[Translation]
To answer your question, the resources requested are part of a framework in which international tax policies are evolving quickly and becoming very complex. A concrete and recent example is the American reform that took place in late 2017. The government announced a series of measures in the economic statement, but the government also mentioned that, in order to properly understand the magnitude of the changes in the United States, more ongoing analyses were needed. Essentially, the funding requested will be used to further analyze various issues or new policies caused by that U.S. reform. All that is not solely related to the new reform. Once again, it is more broadly part of an international tax policy perspective.
Senator Forest: I strongly believe that, in the context of globalization and the challenge of keeping our resources in Canada, just like with the challenge of succession in our organizations and businesses, it is important to have a competitive and fair tax system. Since our current tax system is an added series of measures dating back to the pre-war effort, it may be the right time to carry out an in-depth analysis of the Canadian tax system. Do you agree with that?
Mr. Jovanovic: Various observers and groups agree with you, and that is certainly the government’s impression in that respect. We analyze the tax system on an ongoing basis. In every budget, we try to improve the system. We make sure that its integrity is being preserved by implementing various integrity measures. We also try to improve the system’s competitiveness, as the government did in the 2018 economic statement.
Senator Forest: Is the funding of $800,000 intended for a very thorough analysis on the impact, given the reform that took place in January 2018?
Mr. Jovanovic: That is an important component. It may require the acquisition of data for a more thorough analysis of the potential impacts of the U.S. policy, of various more specific measures, including GILTI and BEAT, and everything they have done in terms of imitating interest expenses, for example, to better understand the impact on Canadian and American companies’ investment decisions. That may require very close consultations with certain tax experts, be they American or Canadian, to better understand the situation.
[English]
Senator Andreychuk: I’ll take the liberty of following up on Senator’s Forest’s comments.
I take what you do in tax policy assessment, from what you said — and I may have misunderstood — is more reactive to what is going on in the world rather than standing back and saying we should look at our tax reform, first of all, as a framework and whether it works for Canada, and to use new tools within that to be competitive and front-running in the world.
What I hear from you and the money that’s going to be spent, it’s reactive. If the U.S. does this, we’ll have a little pot of money to be able to apply. Am I correct? In other words, you haven’t been given instructions to stand back and look at the tax policy. As you know, this committee has spent a lot of time on that, so you know where we are coming from.
Mr. Jovanovic: This is not to work on overall reform of the tax system. This is to continue to work on an ongoing basis, incrementally understanding developments in other countries and effect of these developments on Canada. It involves understanding, also, the potential reaction to what has been done in the Fall Economic Statement. It is to continue to monitor the situation and how businesses react to the reform in the United States. This is critical and very important.
Now, whether it’s reactive or responsive, clearly the U.S. reform is a big development. We have been following that from the beginning, even when it was unfolding, and we continue to do so.
Senator Andreychuk: You said that there are statutory items that you have brought to our attention. I’m interested in the decrease in interest on the unmatured debt. We are all following the international situation. There is a lot of discussion about downturns, et cetera. Is there any analysis being done as to what an economic downturn is going to do to the entire budget and the prospects of future funding, et cetera?
In other words, the dialogue is certainly out there. I don’t see it addressed in questions and answers with the minister. He is pretty optimistic that life is going to get better rather than worse. As parliamentarians, I think we want to be sure we are ready for anything, plus or minus, and I see this downturn. Is there any analysis of the consequences of continuing downturns?
Ms. Bess: I’ll invite my colleague Nicolas Moreau to speak to that.
In terms of the supplementary estimates and the changes here, it’s really the result of lower financial requirements for debt from what had been predicted in the budget. That’s the change in the Supplementary Estimates. As for your question on the outlook and the economic downturn, I’ll let Mr. Moreau speak to that.
[Translation]
Nicolas Moreau, Director General, Funds Management Division, Financial Sector Policy Branch, Department of Finance: Good afternoon, my name is Nicolas Moreau, and I am director general of the Funds Management Division at the Department of Finance. Thank you for your question.
Of course, when we at the Department of Finance establish our debt strategy to discuss costs, we first use projections from the private sector. For many years, we have been using the private sector average to anticipate interest rates, but also for economic projections. However, when determining our allocation for the debt in various sectors for which we want to issue that debt, we have models for analyzing the impact different economic scenarios could have on the costs associated with the debt. We ensure that our implementation of the projection is robust according to various scenarios. We try to minimalize the costs related to anticipated market risks. Right now, we are looking at risks that are increasing or decreasing. We have a scenario, we establish a model with numerous simulations, we average it out and ensure that we have a robust plan based on different scenarios.
[English]
Senator Andreychuk: Do you have a red-alert strategy if it’s not within your scenarios?
[Translation]
Mr. Moreau: We always have contingency plans in case of a major economic shock like the one in 2009. We always have flexibility to increase the issuing of debt in certain sectors, as we know full well that, if an economic shock occurred tomorrow morning, markets would like to have more short-term debt than long-term debt, so we allow ourselves some flexibility to increase the debt in sectors where we know markets will want to invest. That is contrary to more long-term debts where, given the economic uncertainty, markets are not usually interested in purchasing the debt.
Senator Forest-Niesing: Thank you for being here. I would like to continue along the same lines. Two figures caught my eye in statutory forecasts. One of the them is the $105 million attributable to an increase in other interest costs. If I understand correctly, those figures are based on forecasts that take into account the private sector average. Further on, I see a negative amount of $138 million, which represents a decrease in interest on unmatured debt. Can you elaborate on why unmatured debt is lower than anticipated when increases are expected for other interest costs?
Mr. Moreau: There are two types of debt. There is debt issued over the course of the year and the one issued in the past, which has variable costs compared to the market rate. The $105-million increase refers to the fact that short-term rates, Treasury bills and 10-year interest rates have increased a bit more than anticipated compared with the private sector average, which is why there is an increase.
Concerning debt that is already in circulation, it mostly refers to bills indexed at real rates, or rates indexed according to inflation. An adjustment was made downward compared to what had been anticipated. The inflation rate has been slightly lower than anticipated.
Senator Forest-Niesing: That’s more clear, thank you. Mr. Mills, thank you for joining us, as well. I would like to better understand biometric screening. In Canada, visitors who apply for a visa, a work permit, a study permit or permanent residence have to provide their data — fingerprints, a photo, and so on. That biometric information is shared with five immigration partners, including Australia, New Zealand, the United Kingdom and the United States. I am worried about the confidentiality you can ensure when it comes to biometric information you control. Could you shed some light on that for me please?
[English]
Mr. MacDonald: Two things. I will give a quick overview, and we can also provide more detail to the committee if that’s acceptable.
The biometric-sharing partners are our trusted partners; they are called the M5. They are the five countries that work in immigration, security and all kinds of contexts overall. With the biometric-sharing agreements, we have strict protocols around the sharing but also the use and the non-retention by the countries that then do a check and report back to us, as we do with them, on the biometrics.
A full protection regime is implemented with privacy impact assessments, and we work with the Privacy Commissioner when we develop these programs ahead of time. The program is built off the trusted relationship and strict protections of each country according to their domestic laws as well.
Senator Forest-Niesing: Did I understand you to say that, pursuant to agreements we have within this M5 group, once shared there is an expectation that the information would not be retained? It would be destroyed or returned?
Mr. MacDonald: This is the part where I would like to provide written confirmation because I don’t have, from my memory, the destruction and retention policies for each of the partners. I’d rather give precision to the committee.
The Chair: Through the clerk.
Mr. MacDonald: Yes.
Senator Klyne: Thank you for attending this afternoon. My first question is for the Department of Finance Canada, which not that long ago released a discussion paper and announced consultations on open banking. I want to focus on open banking for a moment. I see before us a request for $900,000 for the review of open banking. I am wondering how those funds will be used toward a review of open banking.
Ms. Bess: Thank you for your question. I’ll ask my colleague Ms. Leah Anderson to respond. At a high level, it’s to hire some personnel to join the existing open banking review team to support an advisory council, to cover costs associated with consultations, fact-finding trips and stakeholder meetings.
Ms. Anderson: The funds were provided over a three-year period; so there is $800,000 for this year. It’s the four components that Ms. Bess outlined. There is funding to support the panel. They are operating on a pro-bono basis, but it does fund their travel. We are doing a lot of it. We just completed three major consultations in various cities across Canada.
It supports the functioning of a secretariat within Finance Canada, so the staff that do the research and help facilitate the work of the panel. It helps support contracts. This is a very technical issue, and raises a lot of policy issues at the same time. We wanted money available to contract experts as appropriate to inform us on next steps.
Finally, it supports the engagement process, so having these round tables across Canada to get the feedback of various Canadians and other stakeholders.
Senator Klyne: On the consultation side, when do you plan to have your review completed? Do you anticipate there will be further requests on this?
Ms. Anderson: This is very much a fact-finding stage. The government announced last fall that we would conduct a review into the merits of open banking. That’s very much the stage we are at is reviewing the merits. Once we assess whether it is indeed meritorious and good for Canada to pursue that direction, we will consider an implementation phase, which could require additional funding depending on the type of implementation we pursue.
Senator Klyne: This should bring it to the go or no-go point.
Ms. Anderson: Exactly.
Senator Klyne: What happens if we don’t do open banking? Who stands to lose the most, the consumer or the financial institutions?
Ms. Anderson: That’s speculative at this juncture. It is premature to comment on that. There is a lot of potential, and we released a consultation paper that outlines the benefits of it to all of the financial-sector industry players as well as to consumers and small businesses, but there are risks that need to be mitigated, like cyberprivacy.
Senator M. Deacon: Regarding the IRCC, looking at one of the sections we have shared this afternoon about outstanding loans, we have $267,245 for the write-off of 748 outstanding immigration loans. By the same token, 93 per cent of loans are repaid, which we all know in the world is not a perfect number but certainly a good number. As far as those outstanding loans, is there one or two key reasons why they are outstanding or what they represent? Is anything being done to take that 93 per cent to 100 per cent?
[Translation]
Mr. Mills: The loan recovery record for immigration loans is 91%. People who have access to these loans may reimburse them, depending on the size of the loans, over two to seven years. This is a humanitarian program for refugees that are resettled by the government, or those who come to settle in Canada. Great efforts are made to recover these loans. At Immigration, Refugees and Citizenship Canada, a large team works on collecting reimbursements on the loans. The $300,000 amounts we are writing off at this time concern people who have returned to their countries and whose loans were less than $25 or $50, or deceased persons, for example. The activities involved in recovering the loans would cost more than the amounts involved; that is why we are writing off those loans this year.
[English]
Senator M. Deacon: Looking at the continuing conversation with the payments for the Canada Infrastructure Bank and the information we have there with the 99 increase, I am wondering what has happened from forecast to now. What kinds of things might account for that number?
Mr. Botham: I will provide a bit of context on the Canada Infrastructure Bank and our role as a department. It stems from the legislation that established the bank, which included two main provisions which speak to this. One is the authority of the Minister of Finance to requisition funds to support the operations of the bank. So there is that function that the minister has and then consequent implications for the department.
The second is the role of the Minister of Finance insofar as the corporate plan, operating plan and capital plan for the bank. The Minister of Finance’s concurrence is required for the responsible minister to recommend those to Treasury Board for their consideration.
The reason I raise that is, on the one hand, the Minister of Finance has responsibility for ensuring the bank has funds to support its operations and projects. At the same time, the minister has the ability to provide oversight to the corporate plan, which is the identification of projects that the bank would undertake over a period, including in the coming period of a year. Because of that, the minister has visibility into which projects are coming. They are articulated in a corporate plan. The funding associated with those projects is also included.
As one moves through the course of the year, a project that’s identified may come to fruition. There may be the signing of documentation. The funds required as a result of that then need to be requisitioned by the Minister of Finance.
In this particular case, there was a project identified in the corporate plan, the Réseau électrique métropolitain, and the agreement for that project was signed in August 2018. At that time there was full knowledge about what the cost and the schedule in this case would be.
So in this current fiscal year there was a requirement for an additional $90 million to be requisitioned by the Minister of Finance, which came in the supplementary estimates, so that two payments could be made for that project by the bank.
Senator M. Deacon: Thank you.
Senator Marshall: This question is for Mr. Mills. I was trying to track the total cost of the asylum seekers for this year. I know your department had $17 million, I think, in Vote 40. This is another $14 million on top of it. I believe we were told that your department is like the overseer or umbrella. So what has been the total cost of the irregular migrants in this fiscal year?
[Translation]
Mr. Mills: It is still a bit too early to determine the total amount spent on irregular immigration last year. Since the fiscal year ends on March 31, we will then consolidate the information with the various departments. It is too soon at this time to determine the exact amount spent by the federal government as a whole.
[English]
Senator Marshall: The fiscal year end is in another month and a half. Could you make a commitment to provide us with that final number? When do you expect to have it? Would you have it by, say, June?
[Translation]
Mr. Mills: The information will probably be available in mid-June when public accounts are prepared. At that time we can contact the clerk to provide you with that information.
Senator Forest: I’d like to ask an additional question about the $800,000 budget regarding the analysis of certain tax points. What are the available references to consult the objectives of your analysis, the action plan to reach those objectives, and the timeline? May we be made aware of your planning, with regard to the actions you will be undertaking in this regard?
[English]
Ms. Bess: I would like to invite my colleague from tax policy to respond to that question.
[Translation]
Mr. Jovanovic: Thank you for your question. The funds are for an internal analysis at the Department of Finance. Until now, we had not considered making public any planning that includes particular objectives. Once again, the purpose of those analyses is to increase management’s analytical capacity to assess and follow what is being done internationally in the development of tax policy, particularly corporate tax.
Senator Forest: These funds are earmarked as public funds, but their objectives and results are not subject to any accountability. There is an $800,000 amount allocated to your analyses, and that’s it?
Mr. Jovanovic: Accountability is linked to our implicit responsibility to carry out the best possible analysis so as to provide the best possible advice to the Minister of Finance.
The Chair: I thank the Department of Finance, through Ms. Bess, as well as Immigration, Refugees and Citizenship Canada, through Mr. Mills. Thank you very much for being here, and may I extend our sincere congratulations to your team for having answered our questions.
We are continuing our study of supplementary estimates (B) for the fiscal year ending March 31, 2019. From the Department of National Defence and the Canadian Armed Forces, we welcome Julie Charron, Acting Assistant Deputy Minister (Finance) and Acting Chief Financial Officer; Patrick Finn, Assistant Deputy Minister (Materiel); and Major-General Hercule Gosselin, Chief of Programme.
[English]
The witnesses from the Department of Veterans Affairs Canada are Madam Elizabeth Stuart, Assistant Deputy Minister, Chief Financial Officer and Corporate Services; accompanied by Madam Faith McIntyre, Acting Assistant Deputy Minister, Strategic Policy and Commemoration.
[Translation]
By videoconference from Charlottetown, Prince Edward Island, we welcome Michel Doiron, Assistant Deputy Minister, Service Delivery. Can you hear us well?
[English]
Michel Doiron, Assistant Deputy Minister, Service Delivery, Veterans Affairs Canada: I can hear you loud and clear. Thank you.
The Chair: Ms. Charron will be the first to give her opening comments to be followed by Madam Stuart and then questions from the senators.
Julie Charron, Acting Assistant Deputy Minister (Finance) and Acting Chief Financial Officer, Department of National Defence and the Canadian Armed Forces: Thank you very much, Mr. Chair and members, for the invitation to present the Supplementary Estimates (B) for the 2018-19 fiscal year on behalf of the Department of National Defence.
It’s an honour to meet with distinguished members and colleagues before the committee. Today I’m joined by Patrick Finn, ADM (Materiel); and Chief of Program, Major-General Hercule Gosselin.
[Translation]
The Department of National Defence and the Canadian Armed Forces continue to focus on strong fiscal responsibility and careful stewardship of resources. The magnitude, complexity and visibility of the Defence budget demand a cohesive, comprehensive and strategic approach to maximizing the efficacy of our expenditures and investments. As a result, the department continues to monitor its fiscal requirements closely and manages them prudently.
[English]
Turning to the supplementary estimates before you, National Defence is seeking to access approximately $569.4 million in additional funding, including $7.5 million in statutory funding. This comprises $396.5 million related to operating costs, $165.4 million related to capital assets and, as mentioned previously, statutory spending of $7.5 million for employee benefit plans related in large part to the new operating costs.
This additional funding will result in proposed authorities to date of $16.1 billion for operating, $4.2 billion for capital, $0.2 billion for grants and contributions and $1.2 billion for statutory items, for a total budget of $21.7 billion.
This is higher than the total voted authority for 2017-18 and aligns with department priorities and our new strategy on defence outlined in Strong, Secure, Engaged.
The increased funding requested in the operating vote of $396 million relates to the continued military contribution of Canada to global security initiatives in support of our NATO allies in Central and Eastern Europe, international security, stability in the Middle East and UN operations in Mali. This is for $383 million. Also for the funding of the department’s effort for the 2018 G7 summit in Charlevoix, $10.5 million. There are several smaller — but not less important — areas, including funding for modernization of C6 general purpose machine guns and reinvestment of revenues and royalties from the sale of real properties and intellectual property.
[Translation]
Vote 5 funds the investment in projects to acquire assets required to establish and maintain defence capabilities. These investments ensure the men and women in the Canadian Armed Forces have the equipment and other assets they need to conduct their operations. Under the new funding model DND is able to demonstrate fiscally responsible practices by monitoring cash requirements for capital projects to avoid lapses when projects are delayed and funds are not going to be used funding within the fiscal year, or when projects are ahead of schedule and would normally require a request for additional funding.
Active cash management provides the information that enables DND touse surpluses in one project to fund demands in another approved project. This avoids unnecessary requests to relieve pressure in one area while funds are being lapsed in another project in the investment portfolio.
[English]
The $165.4 million requested in Vote 5 provides $159 million for the Arctic and offshore patrol ships where DND has been able to advance the schedule for production of ships. This request demonstrates flexibility in our new funding model to align funding from future years with project costs in the current year. This situation also demonstrates DND’s ability to work with stakeholders and suppliers to optimize the delivery and production of schedules.
The remaining funding of $6.4 million is for equipment related to Canada’s continued military contribution to global security initiatives. There is also a transfer of $20 million of operating funding to grants and contributions. This relates to the NATO security investment programs and a contribution to the Canadian Naval Memorial Trust in support of the preservation of HMCS Sackville.
The department receives services from other departments and organizations of government or participates in programs where DND is not the lead department. Funding can be transferred to these other government departments from operating funds and from capital funds. The requests in the supplementary estimates include 10 transfers going to OGDs for a total transfer out of $10.2 million, which is sourced from Vote 1. From Vote 1 it’s $5.6 million, and from Vote 5 it’s $4.6 million.
[Translation]
In closing, Mr. Chair, the Department continues its commitment to monitor and manage our fiscal requirements to ensure value for taxpayer dollars and continue our effort to maintain responsible spending.
[English]
My colleagues and I would be pleased to address comments or questions you may have. Thank you.
[Translation]
The Chair: Thank you, Ms. Charron. Ms. Stuart, you have the floor.
Elizabeth Stuart, Assistant Deputy Minister, Chief Financial Officer and Corporate Services Branch, Veterans Affairs Canada: Good afternoon, ladies and gentlemen of the committee. It is a pleasure to be here with you, and I look forward to discussing Veterans Affairs 2018-19 supplementary estimates (B) submission.
[English]
Honourable members, as you know, the department is responsible for providing benefits and programs to veterans, Canadian Armed Forces personnel and their families in recognition of their service to Canada, and ensuring their achievements and sacrifices are honoured and remembered through commemorative activities.
Mr. Chair, committee members, the department is proud of this dual mandate, just as it is proud to continue to do everything in its power to enhance the programs and services that are important to Canada’s veterans and their families.
Mr. Chair, committee members, through his mandate letter, our minister is charged with providing veterans with the respect, support, care and economic opportunities they deserve. This includes providing them with new career opportunities once they leave the military, making it easier for them to access services and doing more to support their families.
I am pleased to convey that Veterans Affairs Canada’s 2018-19 Supplementary Estimates (B) reflect the steps taken to date to ensure Canadian veterans and their families are treated with care, compassion and respect.
I will now summarize the contents of our supplementary estimates submission. First, it is important to understand that Veterans Affairs Canada’s budget fluctuates each year due to the demand-driven nature of its programs and services. VAC updates its client and expenditure forecast each year to ensure that all veterans who come forward receive the benefits to which they are entitled. However, expenses are only incurred for the veterans who come forward and qualify for our programs and services.
Veterans Affairs’ overall total planned spending this fiscal year, including the supplementary estimates, is approximately $4.8 billion. These supplementary estimates have increased the department’s total current fiscal year budget by $323.2 million. This increase is primarily attributable to veterans’ programs and services which flow to Canadian Armed Forces veterans through the New Veterans Charter. In fact, approximately 92 per cent of VAC’s budget flows directly to veterans and their families. This is a direct result of the demand-driven nature of VAC’s programs.
Every year, Veterans Affairs prepares the update to the client and expenditure forecast. The current year client and expenditure forecast reveal a 9.4 per cent increase in the number of Canadian Armed Forces veterans accessing benefits and services.
Additionally, over the past three years we have experienced approximately a 30 per cent increase in disability applications. Factors such as these have led to increased funding requirements.
For these estimates in particular, VAC requested and received additional program funding primarily for disability awards, Earnings Loss Benefit for Veterans, disability pensions and the Retirement Income Security Benefit. Veterans Affairs builds sufficient flexibility to ensure that all veterans who come forward seeking benefits receive the benefits for which they are eligible and to which they are entitled.
VAC’s program budgets may only be used for the purpose for which they were intended. Excess funds cannot be redirected for other purposes without explicit consent from Treasury Board.
With the implementation of Pension for Life, Veterans Affairs Canada will make it easier for veterans to apply for the benefits and services they need.
You may recall the NDP motion in the house last fall to reallocate unspent funding for Canada’s veterans that passed unanimously in the House of Commons. The motion stated that any money carried forward should be targeted toward service delivery to ensure Veterans Affairs Canada is meeting its commitment to service excellence for veterans.
Although passed in the house, central agency authority is still required to do so. We are working with our central agency colleagues to obtain this authority and ensure that our veterans are the direct beneficiaries of it.
I would also like to highlight some other areas of key financial significance. First is the Parliamentary Budget Officer’s report released last week entitled The cost differential between three regimes of Veterans Benefits, which compares the two most recent regimes of veterans’ benefits to Pension for Life, which will take effect April 1, 2019.
The Parliamentary Budget Officer’s analysis reveals that although not as rich as the Pension Act, Pension for Life is indeed an improvement over today’s New Veterans Charter.
Second is the compensation owed to approximately 270,000 veterans, survivors and members of the Royal Canada Mounted Police related to incorrect disability pension payments issued by Veterans Affairs between 2003 and 2010. The incorrect payments occurred because a change to the personal tax exemptions under the Income Tax Act was not incorporated in Veterans Affairs’ annual adjustment calculations. The estimated value of the error is approximately $165 million. Those affected will receive a retroactive payment. Given the number of individuals affected, we anticipate issuing the payments before the end of 2020.
[Translation]
Rest assured, however, our top priority is to provide veterans with excellent service — demonstrating care, compassion, and respect — from their first moment of contact with our department. We place veterans at the centre of everything we do — our philosophies, our ideas and our operations.
Finally, we continue to work closely with the Department of National Defence to make sure we fully support our Canadian Armed Forces members in making a smooth transition to civilian life by focusing on their overall well-being.
[English]
Thank you, Mr. Chair. We would be pleased to address any questions that you or other committee members may have about these supplementary estimates.
Senator Marshall: Thank you very much. My first question is for Ms. Charron and Mr. Finn. Can you give us some more information on the Arctic and Offshore Parole Ship Project, the $159 million? What are we paying for there? Is it for one ship or two ships? I believe the program is for five or six. What is being paid for with the $159 million?
Patrick Finn, Assistant Deputy Minister (Materiel), Department of National Defence and the Canadian Armed Forces: Thank you, senator, for the question. As you indicate, the program is now for six ships, the sixth ship having been announced last fall. We now have three ships in construction, and a fourth will start later this year.
A lot of this funding is actually for material and some of the things we are doing. We are seeking, obviously, the economies of scale. Since it was announced before Christmas, we are doing the sixth ship. It is ordering a lot of material and, in many cases, it is a two-to-three-year lead time to get some slow-speed diesel engines and things of that nature. So this funding allows us to ensure we continue the project in a drum beat.
The first ship, HMCS Harry DeWolf, will be delivered to the navy this summer, and approximately every 12-month interval thereafter another ship will join the fleet. So this money will enable us to make sure that continues as planned.
Senator Marshall: The $159 million is for the first three ships, including the HMCS Harry DeWolf?
Mr. Finn: It’s actually for all ships. In this case, it’s probably more for ship 5 and ship 6. We had not been ordering all the material for the sixth ship until approved, and now we will do that.
Senator Marshall: Are the six ships rolled into one contract? I had understood the five were in one contract, and the sixth was in addition.
Mr. Finn: Senator, they are all in one contract. It was a contract for five with an option for a sixth. We basically have triggered that option. We amended the contract late last year to introduce a firm six ships.
Senator Marshall: How much have we paid out so far for that program, for the Arctic and Offshore Patrol Ship Project?
Mr. Finn: I don’t have the specific numbers. I don’t know if my colleague has it.
Ms. Charron: Yes, I do. Thank you, senator, for your question. So far, we have paid approximately $339 million for the ships.
Senator Marshall: What is the total value of the contract for the six ships?
Mr. Finn: I have the exact number for you here, senator. The contract value itself is $3.2 billion. It’s an overall project budget of $4.3 billion, so it covers a number of other things. For example, the Nanisivik Naval Facility in the North for refuelling and berthing of ships, obviously the project costs and other things, but the contract, which is for six ships plus all the training, spare parts and the technical data package, is a contract for $4.3 billion.
Senator Marshall: Strong, Secure, Engaged has $6.6 billion there for capital this year. How much of the $6.6 billion was earmarked for the Arctic and offshore patrol ships?
Ms. Charron: Originally in the SSE we had, for the first five years, a total of $220 million allocated for AOPS.
Senator Marshall: Over five years?
Ms. Charron: Over five years.
Senator Marshall: It is not broken down by year, is it?
Ms. Charron: I don’t have it here by year.
Senator Marshall: Could you get it for us by year, how much of the $6.6 billion was earmarked for those six ships?
Ms. Charron: Yes, I can.
[Translation]
Senator Pratte: I am interested in the funds allocated to peacekeeping operations in Mali. You are asking for slightly more than $75 million. Can you tell me how much this mission will have cost, in total, in this fiscal year?
Ms. Charron: This year, in 2018-19, we expect to spend $75.7 million, which is the amount requested in the supplementary estimates. The Department of National Defence absorbs part of the cost of foreign operations, and another part comes from the fiscal framework. This year, we expect to spend $75.5 million on Mali.
Senator Pratte: Fine; so the amount requested in supplementary estimates (B) is the total amount for the year?
Ms. Charron: Yes, Senator, that is correct.
Senator Pratte: Do you have some idea of what will be required for the next fiscal year, since the mission will continue until July?
Ms. Charron: The amount has not yet been determined for next year. The total amount allocated to the mission is $511 million. The amount for this year is $75 million, but I do not have the amount for next year with me.
Senator Pratte: You said that the total cost of the mission, in principle, was $511 million?
Ms. Charron: An amount of $511 million was approved for 2017-18 to 2021-22. We have spent $75.7 million so far for 2018, and an amount remains to be confirmed for 2019-20.
Senator Pratte: Thank you. The largest amount requested in these votes is the amount of $307.6 million to support Canada’s military contribution to the anti-Daesh coalition and to NATO operations. Simply regarding the process, I’d like to know why there is such a large amount in the supplementary estimates (B). After all, that is $307 million dollars, it isn’t an insignificant amount; these amounts were not predictable?
Ms. Charron: Thank you for the question, Senator Pratte. The way this works is that there is a certain amount of about $120 million in the Department of National Defence core funds that is absorbed by the department. Afterwards, depending on the requests we receive, it is normal practice to come back and request the additional amounts when supplementary estimates (B) are submitted. This is not an exception, it is similar to what we have requested in past years, and it depends on the missions that are approved and the personnel that is deployed abroad.
Senator Pratte: When you say it depends on the requests you receive, do you mean NATO or the United nations, which may ask Canada for a contribution?
Ms. Charron: Yes, or there may be other mandates, in connection with floods, for instance. If we receive more requests, we may have additional expenses.
Senator Pratte: Thank you.
[English]
Senator Eaton: It’s very exciting that you have one Arctic patrol ship ready. It sounds good. It has been launched. When will it be ready to start working in the North?
Mr. Finn: Thank you, senator, for the question. The ship will be handed over to the navy this summer. They will then go through, as they often do with first-of-class, a fair bit of extensive training of the crew, operational emergency training, et cetera. The navy’s intention at this point is to deploy the first ship into the Arctic in the summer of 2020.
Senator Eaton: Will it be able to operate in the Arctic and the North in the winter?
Mr. Finn: This is not an icebreaker. It is an ice-capable ship, and so it will not be able to operate in ice in the extreme of winter, but it can operate in the North beyond the normal season where we send up frigates and other ships. We can operate independently for an extended period until late summer. Also, if it’s with a Coast Guard icebreaker, it would have further capability, but it is what we call the extended summer into early fall period, senator.
Senator Eaton: Thank you. The defence policy Strong, Secure, Engaged envisaged for this year $6.6 billion; am I correct? Last year I believe you were also about $2 billion behind in the capital spending predicted in your defence policy.
I realize you don’t lose the money if you don’t spend it, it’s repurposed, but have you calculated the impact of inflation on your purchasing power and what the costs could be? Do you take that into consideration when something is delayed and then moved forward?
Mr. Finn: The money we don’t draw down goes into a number of buckets, some of which, as you described, it is project delays, and we look at that. There are a number of other cases where it’s actually projects for which we had forecasted expenditure, it could be contingency, this money we set aside as we were doing competitive contracts, and the money was not required to actually deliver the capabilities planned.
We have a number of projects, many of which we are closing off and finishing, which when Strong, Secure, Engaged was being developed, there was cost uncertainty; so tactical armoured control vehicles, CC-130J aircraft, a number of other ones where it is not that the money has not been drawn down — it suffers escalation, in fact — it has been efficiency in the projects and allows us to reallocate the money.
Senator Eaton: The money is not drawn down. I understand that perfectly. But as you begin to put in orders and get deliveries and deliveries are delayed, the costs will go up more than anticipated or estimated.
Mr. Finn: There are some cases like that. What I’m actually speaking of is the orders are put in and the price is lower than expected. So there was money earmarked we don’t need so we can actually repurpose the money for other projects, as my colleague said, to strike the balance of some that has come under, and therefore the money is not drawn down because it’s not required today or tomorrow. We repurpose that money and look at other projects that may be above budget and how we strike the balance.
Senator Eaton: Has the surface combatants contract all been tied up? Are they starting those?
Mr. Finn: We have signed the definition contract, senator, which is about detailed design and long lead items. We are about three years away from the implementation contract which would then kind of tie it down. That is the case in Strong, Secure, Engaged where there was a significant increase to the budget, now at $56 billion to $60 billion which aligns with the PBO work. That is an area where there is always, given its size and complexity, some cost risk.
Senator Eaton: So it will be three more years before Irving starts building the surface combatants?
Mr. Finn: What we’re trying to do is manage this so as they complete the AOPS work, the Arctic and Offshore Patrol Ships, they would roll into surface combatants. Right now there is a bit of a gap between the two. The work doesn’t completely end but there is a downturn. We are working to what I would call load level that work so there is continuous work. It is three to four years before we are cutting steel on the first ship, senator, which is why we have “bid-lifed” and modernized the frigates and we continue to invest there.
[Translation]
Senator Forest: Thank you for your statements. My first question is about the G7. Since the last appropriations are requested for that event that took place in June 2018, what is the Department of Defence’s total budget for that summit?
Ms. Charron: The total budget for the G7 was about $34.2 million. We had a role to play in supporting the RCMP and Public Safety at that time. The expenses were less than anticipated and the total amount that was spent was about $12 million; $2 million in 2017-18, and $10 million in 2018-19.
Senator Forest: An amount of $34 million had been approved and you spent $12 million.
Ms. Charron: The original budget had been $34 million, correct.
Senator Forest: That is what one might call an optimistic budget.
Ms. Charron: The role of National Defence was to support the RCMP, and we were basically called on to provide transportation services, as needed.
Senator Forest: Are the specifications the same for the six Arctic and offshore patrol boats? Are six identical ships being built?
Mr. Finn: Thank you for the question. That is indeed the case, they will be identical ships. In fact, for that reason, we built a three-dimensional model to ensure we had a design that would allow for mass production. The six ships will be identical.
Senator Forest: I suppose the sixth will cost less than the first. In terms of cost per unit, are there economies of scale?
Mr. Finn: Yes. All of the design costs are applied to the first ship. In general, the first ship of a series is much more costly for those reasons. There is also a learning process from one ship to the next.
Senator Forest: In the end, will you be able to tell us the cost of each ship?
Mr. Finn: In the end, yes, we will be able to do that.
Senator Forest: That is interesting. Now, since these are offshore and Arctic patrol ships, and given the particular weather conditions in the Arctic, did it occur to anyone that it might be good to add some icebreaking capability to these ships?
Mr. Finn: No. They can navigate in up to one metre of what we call “first-year ice”. We call them Arctic and offshore patrol ships for the reasons that were mentioned earlier. In the middle of winter, they do not have the necessary Arctic capability. In fact, most icebreakers do not have that capability either, especially the Canadian and American ones. In the fall, in winter and in early spring, they operate in the South, and in the summer, the can patrol in the North.
Senator Forest: Not one of these ships was equipped in a manner better suited to the Arctic, in case we ever have to intervene in winter?
Mr. Finn: No. To some degree we depend on the Coast Guard during icebreaker season, but we can prolong the season if we are escorted by an icebreaker. Defence’s purpose is to patrol during the period when they can navigate in the North.
Senator Forest: It seems that the Coast Guard fleet is starting to feel its age.
Mr. Finn: The ships are getting old, Senator.
Senator Forest: That is a fact. You mentioned earlier, with regard to veterans, that there was a surplus that was blocked by an agency. I’d like to know which agency is blocking the veterans’ surplus?
Ms. Stuart: I’m sorry, could you repeat the question, please?
Senator Forest: You mentioned in your statement that there was a surplus whose transfer was being blocked by an agency. I was wondering what agency was blocking the transfer of these funds to the veterans.
Ms. Stuart: Thank you very much for the question.
[English]
The Department of Veterans Affairs deals very closely with our colleagues in central agencies. In this case it is PCO and Treasury Board Secretariat and also the Department of Finance with whom we engage regarding the financial management strategy that we are putting forth to produce a proposal for managing assiduously our allocations over the span of two fiscal years so we can profit from the NDP motion for the benefit of services to our veterans.
[Translation]
Faith McIntyre, Acting Assistant Deputy Minister, Strategic Policy and Commemoration, Veterans Affairs Canada: If I may add something, the funds are not blocked, but there is a process that must be followed to obtain the approval to spend the funds.
Senator Forest: They aren’t blocked, but the agency is making haste slowly.
Ms. McIntyre: We have to follow the rules, yes.
[English]
The Chair: Please do not forget even though Madam Stuart was very explicit in her presentation, we can ask Veterans Affairs questions.
Senator Manning: Welcome to our guests here today. I want to get back to your statement, Ms. Stuart, the compensation owed to approximately 270,000 veterans, survivors or members of the Royal Canadian Mounted Police, related to incorrect disability pension payments issued by Veterans Affairs between 2003 and 2010. The estimated value of the error is approximately $165 million. I understand that those affected are without a retroactive payment.
I am just wondering how something of that nature could happen. I’m sure you have plenty of staff, or maybe you don’t. To be able to pick that up somewhere over a seven-year period that we have $165 million of an error. It’s not a small error. So I’m just wondering how that could happen. Is there anybody double-checking these numbers as we go forward, go through? It’s just a bit mind-boggling.
Ms. Stuart: Thank you, senator, for the question. I first became aware, as the CFO, of this calculation error in June of 2017 by means of a presentation from the Office of the Veterans Ombudsman. Immediately upon learning of this apparent discrepancy, our finance team worked very diligently to validate what we had been told. Over several months we looked at all the calculations going back to the change in the Income Tax Act in 2001.
We increased the scope from what was included in the Veterans Ombudsman’s report. We went right back to 2001, through the entire timing of the process. We ended up with, in aggregate, the “up-to” amount you described, the $165 million. So we validated that. I cannot speak at this time to how the error occurred. I know we have found what occurred, but I cannot speak to the means by which decisions were made at this time. I can tell you, though, that we have confidently validated the amount of the error. We are working on an implementation plan to ensure that all veterans who are owed this payment will receive payment prior to the end of 2020.
Senator Manning: Okay. You do not expect to issue payment before 2020, but you are saying all the veterans who are owed money will be paid by the end of 2020? You don’t expect to issue any payments until 2020?
Ms. Stuart: There are two issues: We have the large, new program Pension for Life coming into force April 1 this year. Many of the same individuals who would be working on system design, system implementation and testing for the work to be done to ensure that the payments are made for the calculation error, are the same teams working diligently, seven days a week, preparing us for the coming into force of the Pension for Life. There is a capacity issue.
Second, we have four confirmed class-action lawsuits. The government has litigation counsel appointed. That means the process by which we seek to ensure that all payments are made changes in accordance with that legal activity.
Senator Manning: When you say “capacity issue,” are you referring to the possibility of being short-staffed?
Ms. Stuart: I am not. I am talking about the fact that we have teams working on my side of the house, the corporate side of the house, on the implementation of Pension for Life. It is an agile methodology; it’s working very well. It’s simply that, on April 1, there is still an awful lot of work to be undertaken to continue with training and to continue making improvements on Pension for Life. This is the biggest single program that has come to Veterans Affairs Canada since the New Veterans Charter, the Veterans Well-Being Act.
Our main effort, our no-fail mission, is for Pension for Life in the immediate future. As soon as we are able to turn many of those same people to the work of the IT system’s design and testing, to make sure that we have correct payments to be made — do it once, do it well — that is the plan.
Senator Manning: Thank you.
To Ms. Charron, the increased funding requested in operating costs, Vote 1, of $396.5 million related to one of the issues, the funding of the department’s efforts for the 2008 G7 summit of $10.5 million. Is that the total amount that your department spent on the G7? Or was that an additional amount?
Ms. Charron: Thank you for your question. The total amount that the department will have spent is about $12 million, of which $10.7 million is in 2018-19; $2 million was spent in 2017-18.
At the same time, I would like to make a correction to an answer that I provided on AOPS. The question was how much have we spent on AOPS so far. I answered $339 million. That answer was for 2018-19. The total amount spent on AOPS so far is $2.1 billion. What we have in Strong, Secure, Engaged, for 2018-19 was $583 million.
Senator Boehm: Ms. Charron, thank you for your positive numbers on the G7. It is a relief to me from my previous career that you, in fact, underspent; that is good.
My question is for Ms. Stuart and your team. Veterans’ supports and benefits have been in the news a lot: much discussion and much public discourse as well. I appreciate that in your statement you said that the benefits are demand driven and it’s very difficult to forecast. What are the reasons for this increasing number of requests for support? Do you have a comparison chart in terms of how many veterans are asking for support this year, as opposed to last? Are you projecting an increase as you look forward?
Ms. Stuart: I’ll address the process issue and then turn to my colleague Mr. Doiron for the statistics and the demand side of the question.
As to the process, because of the quasi-statutory nature of our benefits, we undertake a client forecast re-evaluation every year of all current clients and expected future clients into Veterans Affairs Canada. This is the basis for which the forecast is updated. That’s done by the Office of the Chief Actuary, a group of professionals who look out on an accrual basis years from now and on a cash basis.
Largely, the forecasts are updated by historical, evidence-based information, but one cannot predict human behaviour. For example, we have, in one case, the ability to choose between a lump-sum payment and a monthly payment coming up in Pension for Life. We have based that decision on the fact that individuals will make choices that are in their own best interests from a financial point of view over their lifetimes. Of course, that may not end up to be the case. We will see this in our monthly expenditures as we compare them to forecasts. That work will form the next cycle of work into the next quasi-statutory process. Over 93 per cent of our budget is to work to that end.
Michel, would you care to address the specifics?
Mr. Doiron: Thank you for the question. It’s a combination of factors. Since 2015, we have seen an increase of approximately 32 per cent of our workload coming into the department. That is as a result of a combination of factors. Over the years we have added a multitude of new programs. We have also been very actively reaching out to our veterans groups, stakeholder groups, and advising them of a series of programs we have.
We have made some changes to programs to make it easier to apply. We now recognize injuries related to the duties of the soldier without necessarily having seen a certain form they used to fill in at the Canadian Armed Forces. As an example, we know search-and-rescue (SAR) techs will do a lot of jumps out of an airplane. They may never have an accident that injures a knee, but if you have had a thousand jumps out of a helicopter or plane like some of these guys have, science and evidence-based information tells us that over time the knees will be impacted. We recognize that as a service-related injury.
Because of our more proactive outreach to the various groups and the change in the way we are doing some of our business, we have moved from about 37,000 applications per year to probably closer to 62,000 this year. As the Chief Financial Officer was saying, with that increase comes a lag with the quasi-stats, to get some of the money to get it up and running.
That’s where a lot of the delays arise. We are putting into place new technology and new processes to accelerate the process and make it easier.
What’s important to understand is there is a delay at the front end. I arrived here in 2013. Our first application-approval rate was approximately 73 per cent . That means when somebody applied, 73 per cent of the time we would say yes. Then someone would have to go to first level of appeal and second level of appeal at the Veterans Review and Appeal Board. Today we are running at approximately 84 to 85 per cent at first application, so the veteran doesn’t have to go through litigation or appeal levels to receive the treatment and the benefits. That’s a little bit where it’s coming from.
We are out with stakeholder groups. We are doing town halls. We are on the bases talking to soldiers. Twenty-five per cent of our client base is still serving members. That’s the combination that means the numbers have gone up, senator.
Senator Boehm: With your outreach, are you also looking at destigmatization? For example, if a veteran has undergone some damage, for example you mentioned knees, you would say this is why this program is here and don’t feel bad about applying for it.
Mr. Doiron: Absolutely, sir. The big area still is destigmatizing PTSD and mental health issues. We are working closely with the Canadian Armed Forces with their new transition group to make sure that, as the soldier embarks on this transition process, they understand it’s okay to come forward and seek the help they need. We have very good programs, both existing and new, to help soldiers and their families.
Senator M. Deacon: Thank you for those last comments. That is more comforting when we look at the effort to make this environment more collective, engaging and inclusive.
I just want to come on the tail end of one of the questions Senator Manning asked. With respect to the $165 million outstanding and owing, Ms. Stuart you have given a good explanation of what has happened since it came to your desk.
The part I struggle with, and you may have an answer or it might just be a comment, is when we listen to the report, this is $165 million, and there is a really new, next big project and you have capacity issues with staff, that is totally understood. When we read the next paragraph, you say:
Rest assured however, our top priority is to provide veterans with excellent service — demonstrating care, compassion, and respect. . . .
I struggle with those two statements together. These people are owed funds retroactively. I would hope and trust that every effort is made to communicate with these people who are having money held back because of “our” capacity issues, that we find ways to show respect through communication with them so they understand the “why.” Thank you.
Ms. Stuart: Thank you very much, senator. Yes, I agree. The issue of the correction for the calculations entails work that is undertaken by groups of individuals in the service delivery side of our business and also the corporate side who are expert at what they do. They know how to do it and they have been doing excellent work for a number of years.
As I mentioned, Pension for Life must and will come into force on April 1. I wish to assure you that our entire team is exploring a number of options by means of our implementation planning efforts, mindful that there is litigation counsel and legal proceedings. But we know, and are planning to take immediate steps to do as much as we can concurrently with the legal process: for example, identifying the clients.
We have already had communiqués to the public regarding the fact that approximately two thirds of clients are represented by estates. We have plans to ensure that we publish the findings and the information regarding how to contact Veterans Affairs Canada and make every effort possible to reach out to the public and the estates to identify where individuals may be in terms of survivors so we can make the payments. We are also exploring options that would entail garnering additional capacity through contract. So we take this very seriously and we are moving out.
The Chair: Senators, you are seeing a light flashing. That’s because there will be a vote in the Senate at 4:44, so we have time to complete.
[Translation]
Senator Forest-Niesing: I want to thank all of the witnesses. You answered most of questions because my colleagues have asked them. There is still one small detail I’d like to ask about. I’d like to hear what you think the impact of the new lifetime pension will be on the list of those who are asking for benefits. At this time, if I understood correctly, there is quite a long waiting list. How will this affect this waiting list?
Ms. Stuart: Thank you, Senator. I am going to yield the floor to my colleague Michel Doiron.
Mr. Doiron: Thank you for the question. There will be two processes. At this time, there is a backlog. However, with regard to the new lifetime pension, six programs are being amalgamated into one. That will automatically accelerate service.
Moreover, we are going to maximize the use of automation. Veterans will not have to provide the information that is already in the system a second time. They will have electronic access to forms, which will decrease the number of contact points for our employees. Our objective is to accelerate the service. If a veteran is in our system, we recognize him with just the My Bank Account program and his service number. In this way we will be able to answer him very quickly online. We will never eliminate all delays, because we still have to retrieve medical files, consult the physicians, and so on. A lot of work is done on the medical aspect. In the simpler cases, we want the process to be as simple as possible. However, we have to remember that up to April 1, about 36,000 files will have to be processed in this dossier. Those files have to be handled first. Our objective is to maximize the use of artificial intelligence and the use of automation. That is why my colleague mentioned the PFL earlier. We will start on April 1. On that date, we will have a working system, but a lot of improvements will need to be made in the first year. We intend to add modules to facilitate our employees’ task. This process will meet the needs of both the veterans and our employees.
Senator Forest-Niesing: Thank you.
Senator Forest: Mr. Doiron, you said that you would be eliminating contact points. What are these contact points?
Mr. Doiron: When we put the process in place, various employees work on the file, such as educators, nurses, physicians, and specialists. An employee may work on the file and realize that he does not have the necessary skills, and that he must, for instance, consult a nurse. He transfers the file to a nurse. Then there is a second contact point.
Senator Forest: You could be a contact point?
Mr. Doiron: Yes. Employees “touch” the file. We are trying to improve the effectiveness of the system, basically.
Senator Forest: Thank you.
Senator Moncion: Earlier you used the term “represented by estates”; do I understand correctly that you deal with estates in some cases?
[English]
Ms. Stuart: Yes, we are dealing with a good number of estates. As I mentioned earlier, approximately one third of our clients are active and the rest are deceased.
Senator Moncion: Did you think about the impact on these estates and going back to money that you’re giving to someone to whom you owed money between 2000 and 2010? Let’s say an estate has been cleared and discharged. There are costs associated with reopening all these estates and redoing the work. Has this been taken into consideration?
Ms. Stuart: It has. We are working closely with our legal counsel who have experienced litigation settlements involving numerous estates in the past. We’re learning a great deal from them in terms of how to solicit information from the public and from families, some of whom who have lost their beloved veterans some years ago.
I would add that, to put this in perspective, our determination is that the highest end payment as a result of the error is approximately $2,700, with the average being below $500. That said, that is a significant amount of money to many and we want to do right by the veterans and their families, so we are pursuing, absolutely.
Senator Eaton: Ms. Stuart, perhaps you could explain or comment. The PBO has indicated that the people who are going to be hurt by the new changes will be the people who are most severely disabled. To create the new system, the government rolled together a series of different benefits:
Giroux found that one particular stipend — known as the Career Impact Allowance — is being eliminated entirely.
He said that will have an enormous impact on the most severely disabled veterans who join the new system after it’s implemented.
Do you have a comment on that?
Ms. Stuart: I would begin by affirming that we maintain that the well-being of our veterans across all domains is about financial benefits, but it is about much more than financial benefits. I acknowledge the comment to which you refer in the PBO report. I would add that Pension for Life was designed to meet the individual, tailored needs of our veterans and families across all the domains of well-being and —
Senator Eaton: So is he wrong that this will have a negative impact on the most severely disabled veterans?
Ms. Stuart: Here is an issue: The methodologies used by the PBO are not shared with Veterans Affairs Canada. We have our own methodologies and we share raw data with the PBO. There is a firewall between us and PBO for good reasons, and we are not able to receive the information we would need to validate the numbers to see where we come within that.
To my opening statement, this is a comparison of financial to financial to financial without taking into context the myriad benefits and services available to veterans.
Ms. McIntyre: I can add that this is an evolution of our programming for Veterans Affairs Canada in terms of the services and benefits we offer to meet the needs of veterans and their families. In particular, Pension for Life has as one of its objectives to ensure financial stability for those who need it most. What Pension for Life does and in redesigning and evolving, we have created recognition payments which are nontaxable: namely the additional pain and suffering compensation for those who are severely and permanently impaired as a nontaxable recognition benefit under Pension for Life.
We have also separated the employment component in the earnings-loss piece under the Income Replacement Benefit and separated the two to make them distinct, one on the recognition side and one on the earnings-loss side. There will be a 1 per cent career progression which will be offered to individuals at a certain point in time under the Income Replacement Benefit, which also streamlines, as you mentioned, many of the benefits together.
What we will ultimately see is that over the life of a veteran they may stand to receive substantially more funding under the new monthly pension than they could have received under the New Veterans Charter lump sum disability award payment.
The Chair: Before we adjourn, honourable senators, I have a question that was asked by Senator Andreychuk, if I could pass along to Defence.
With respect to your $314 million requested for various missions abroad, could you give us a breakdown, through the clerk, of this funding for each mission, please?
Honourable senators, our next meeting is tomorrow night at 6:45 in room B45. With that, to the Department of National Defence, Canadian Armed Forces, Veterans Affairs Canada, Ms. Charron and Ms. Stuart, thank you very much for your professionalism. It was informative.
(The committee adjourned.)