THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, June 17, 2025
The Standing Senate Committee on National Finance met this day at 9 a.m. [ET] to examine the Main Estimates for the fiscal year ending March 31, 2026, with the exception of Library of Parliament Vote 1, and Supplementary Estimates (A) for the fiscal year ending March 31, 2026.
Senator Éric Forest (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents.
[English]
Please make sure to keep your earpiece away from all microphones at all times.
[Translation]
Please do not touch the microphone. It will be turned on and off by the console operator. Please avoid handling your earpiece when your microphone is on; you can either keep your earpiece on or place it on the sticker on the table for this purpose.
[English]
Thank you all for your cooperation.
[Translation]
Welcome to all senators, as well as to the Canadians watching us on sencanada.ca. My name is Éric Forest and I am deputy chair of the Standing Senate Committee on National Finance. Don’t worry, the chair should arrive shortly to take over. I’d like to invite my colleagues to introduce themselves, starting on my left.
Senator Gignac: Good morning. I am Clément Gignac from Quebec.
Senator Galvez: Good morning. I am Rosa Galvez from Quebec.
[English]
Senator Loffreda: Good morning. Welcome to the Senate. I’m Senator Tony Loffreda from Montreal, Quebec.
Senator Hay: Good morning. I’m Katherine Hay, pronouns she/her, from Ontario.
Senator Pate: Good morning. It’s great to see you all. I’m Kim Pate, and I live here on the unceded, unsurrendered and unreturned territory of the Algonquin Anishinaabeg Nation.
Senator MacAdam: Good morning. Jane MacAdam, from Prince Edward Island.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Dalphond: Good morning. I am Pierre Dalphond from Montreal, in Quebec.
The Deputy Chair: Thank you. Honourable senators, today we will resume our study on the Main Estimates for the fiscal year ending March 31, 2026 and Supplementary Estimates (A) for 2025-26, which were referred to this committee on May 29, 2025 and June 11, 2025, respectively, by the Senate of Canada.
For our first panel, we have the pleasure of welcoming officials from the Office of the Auditor General of Canada: Karen Hogan, Auditor General; Andrew Hayes, Deputy Auditor General; Paule-Anny Pierre, Senior Assistant Auditor General; and Jean-René Drapeau, Assistant Auditor General and Chief Financial Officer. Welcome to all of you and thank you for accepting our invitation to appear today. We will now hear opening remarks from Ms. Hogan.
Please go ahead, Ms. Hogan.
Karen Hogan, Auditor General of Canada, Office of the Auditor General of Canada: Thank you, Mr. Chair. We are pleased to have the opportunity to discuss our Main Estimates for 2025-26. I also understand members of the committee may have questions on our recently tabled reports. I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people. You already introduced my colleagues here at the table with me. Behind me are four members of my management team who were responsible for some of our recent performance audits: Principals Glenn Wheeler, Sami Hannoush and Markirit Armutlu, and Director Isabelle Marsolais.
For our Main Estimates for the 2025-26 fiscal year, our total budget is approximately $136 million. With these resources, we plan to employ the equivalent of 750 full-time employees. During this period, we plan to issue about 100 financial audits, at least 25 performance audits and 4 special examinations. We are currently preparing audits on a wide range of topics, including cybersecurity of government networks and systems, call centres, early learning and child care, and housing of Canadian Armed Forces personnel.
[English]
During the 2025-26 fiscal year, we continue to work on several internal initiatives. These include our engagement with interested parties, our transformation journey and projects to sustain and further develop a skilled, diverse and engaged workforce. These initiatives are key to our efforts to deliver value for those we audit and to meet the needs of legislators and all of Canada’s people.
As you know, last week, I presented four performance audit reports. We would be pleased to answer any questions about these reports. They covered registration under the Indian Act, Canada’s future fighter jets, federal office space and professional services contracts with GC Strategies Inc.
My office also presented four reports from the Commissioner of the Environment and Sustainable Development last week. If the committee has questions specific to those reports, I know the commissioner will be happy to appear before the committee.
Mr. Chair, in closing, I would like to acknowledge the committed, hardworking and devoted team of professionals in my office. I am incredibly proud of the excellent work we deliver.
We thank the committee for its ongoing support and use of our work and are now pleased to answer any questions you may have. Thank you.
[Translation]
The Deputy Chair: Thank you very much, Ms. Hogan. We will now move to questions. I’d like to inform senators that they have a maximum of five minutes for the first round and a maximum of three minutes for the second round. I ask that you be direct with your questions, and that the witnesses give succinct answers. You have my full confidence. The clerk will let me know when your time is up.
[English]
Senator Marshall: Thank you, Ms. Hogan, for being here with your officials.
My question is very general, and the initiative comes from something that was in your audit on space utilization, and that’s systems development within government and the condition of IT systems. There are a number of major systems under development right now, like the delivery modernization. You indicate in space utilization that information systems were lacking. I get this feeling that, within the federal government, many of the systems are very old and outdated, and it’s not just in certain places. It seems like it’s the whole basis of the federal government. It’s very concerning that there isn’t more emphasis and appreciation for the state of the systems within government. Can you just give us your views as to where you think we’re going and whether you think what’s being done now is adequate? Just give us some reassurance that we don’t have anything to worry about.
Ms. Hogan: I’ve issued previous audits, one in particular on modernizing information technology systems. I also did an audit looking at where the Benefits Delivery Modernization project is.
What I would tell you about the IT modernization project is that we highlighted that there were 7,500 systems deemed to be in poor health in the federal public service and that what was missing was information about exactly when they needed to be either decommissioned or replaced and how much it would cost. There is a global picture, but there is some concern around the poor health of so many systems. That was a self-evaluation by the government, that they needed to invest funds.
Over and above that, systems are one thing — systems make you more efficient and deliver better — but you still need quality information. I’m always concerned about the quality of information, and we typically have findings about the quality of information in our audits, because a system isn’t going to make the information better. If you put bad information in, it’s just going to support you in an inappropriate way.
There is a lot of work left to be done, but a lot of good work is happening. We’re going to keep monitoring things like benefit delivery modernization because this is key and essential to delivering Old Age Security and Canada Pension Plan, or CPP, benefits.
Senator Marshall: We had Public Services and Procurement Canada, or PSPC, testify last night before us, and they referenced the fact that they’re engaged in a replacement for the Phoenix system. We had a very bad experience with the Phoenix system, and we’re still dealing with the outcome of it. Now here we are embarking on another major project. How much assurance or confidence do you have that the next one’s going to be done right and that we’re not going to have a second Phoenix? Is the modernization system going to be like Phoenix? What kind of confidence do you have that these major systems are going to be developed and not a problem?
Ms. Hogan: Typically, the Auditor General comes in and looks at things after the fact, after they’ve been done. With so many big systems in transition, my office has been trying to get in there earlier to try to do a pulse check and help provide some support to the public service.
We are looking at the Phoenix replacement. We are also looking at the new excise tax system that was put into place. But when it comes to a different pay system, I think there are many issues at play here. As we follow up every year doing our financial audit, we highlight how many public servants are still being paid inaccurately. A lot of that comes from data that is not timely into the system or inaccurate being put into the system. No matter what pay system you have, people are going to get paid inaccurately if you haven’t fixed the processes around making sure that the information that gets into the system is accurate. I can’t give you confidence about something I haven’t looked at, but I do think it’s important to make sure that all of the pay data is corrected, and there are many individuals who are still waiting several years to have their pay corrected.
Senator Marshall: But as an auditor, you must get the feeling up front that, oh, this looks like it could be a problem in the future?
Ms. Hogan: Well, the feeling I have here is that a new system is going to, perhaps, be more effective, but there is still a complex web of rules related to pay. There were two things that the public service committed to doing. One was simplifying pay rules, but then also trying to find a better system. I think there’s a lot of work to be done on simplification, but also on making sure that you have the people and the accurate information in the system. I can’t tell you the feel of a system I haven’t looked at yet, unfortunately, but I do have concerns.
[Translation]
Senator Gignac: Thank you to the Office of the Auditor General, and welcome. In your audit last week on National Defence, you stated that the costs of the F-35 acquisition were 50% higher than originally planned. What bothered me was that these numbers were supposedly based on outdated data. After your testimony, we will be hearing from National Defence officials and asking them some questions. What was the department’s reaction and what explanation were you given after you published your report?
Ms. Hogan: As you can see in our report, the Department of National Defence agrees with all of our recommendations. The first estimate of $19 billion being based on outdated information is an excellent matter to ask them about. More up-to-date information on the cost of the aircraft was available. In addition, some risk mitigation measures were not implemented. Better monitoring of inflation and foreign currencies was required. The department took some time to update their estimate.
The estimate of $27 billion comes from National Defence. We also recommended that the department monitor costs much more regularly. In my opinion, once a year or longer is not often enough for a project of this scope involving foreign currency. I expect costs and risks to be monitored much more regularly.
Senator Gignac: I don’t know whether your mandate allows you to access contracts. Prime Minister Carney stated that he was considering reviewing the second tranche of the F-35 acquisition in response to the trade war. There are three maintenance sites for F-35s in North America, including one in Mirabel.
Would backing away from the contract possibly mean that L3Harris would no longer provide maintenance for the F-35s? If Canada decides not to purchase the jets, it could jeopardize hundreds of jobs. Do you have access to the contracts that have been signed and to all the provisions, in particular, with respect to the consequences if the government decides not to go ahead with the acquisition? The U.S. has ordered 2,535 jets, and we’ve ordered 88, but now there are threats to cancel part of the order.
Ms. Hogan: It’s not a contract, but an agreement between countries for the purchase of fighter jets. The agreement contains negotiation clauses in case one of the nations wishes to withdraw from the agreement. It would be one of the options if the government were to decide not to purchase 88 F-35 fighter jets. Even if Canada decides to purchase two or three different types of fighter jets, there still won’t be enough qualified pilots. I am concerned by the fact that National Defence is not looking at filling this shortage of workers in its plans. Additional measures are therefore required.
We noted that National Defence has taken the initiative, while knowing that improvements are needed at the Cold Lake and Bagotville bases, as well as at other bases around the country. Once the decision was made to purchase the F-35s, much more information became available on the security requirements. A different type of aircraft would have different requirements, and it’s my opinion that that would drive up costs for the facilities and perhaps lead to delays before the bases are ready to accommodate the fighter jets. The government will have to make those decisions. I can only voice my concerns regarding delays and increasing costs.
Senator Gignac: You’re not the only one concerned about this.
Senator Moreau: Welcome, Auditor General. I’m pleased to meet you and the members of your team for the first time. My questions will be in line with those of my colleague regarding fighter jets. Have you assessed the cost of the government’s potentially deciding to withdraw from the agreement with the other countries for purchasing F-35s?
Ms. Hogan: The government made the decision to purchase 88 fighter jets as part of a country-to-country agreement. For now, it has committed to purchasing four jets and parts for eight others. The parts have a long life cycle. Could the government negotiate to cancel the purchase or maintain it at the current number of jets? That is the government’s decision to make. Any decision to change direction would lead to additional costs and may cause delays.
Senator Moreau: Did you assess the additional costs if the government were to decide, today, to withdraw from the agreement between countries for the F-35 acquisition?
Ms. Hogan: The agreement only requires negotiations between the countries.
Senator Moreau: I imagine you have an idea of the costs the government has already incurred that we wouldn’t get back.
Ms. Hogan: I know the government committed $935 million to purchase four jets and parts for eight others. Each year, an amount goes to the management office in the U.S. However, aside from those amounts, there are no commitments at this time.
Senator Moreau: Are you able to tell us whether the facilities currently under construction or the improvements to the Bagotville and Cold Lake bases could be used for other purposes or other types of aircraft, or would the money have been spent in vain?
Ms. Hogan: There is no doubt that some expenses can’t be recovered. However, a different fighter jet would still mean certain requirements in terms of facilities. National Defence took the initiative to start improving its facilities. Once the decision to purchase F-35s was made, the department obtained details on the requirements. That’s why they are behind by three years on the facilities, which won’t be ready when the first planes arrive. I expect it to be the same if the decision is made to purchase any other type of jet.
Senator Moreau: As auditor general, if the government decided to end the F-35 contract tomorrow, you would have to ask yourself that question and conduct an audit to determine whether this was a good decision for taxpayers. If you had to advise the government today, would you recommend that it withdraw from the agreement between countries, given the costs already incurred?
Ms. Hogan: The government will make its decision over the summer. The Prime Minister requested an analysis. I have no opinions on what will be included.
Senator Moreau: I’m not asking your opinion on the decision to be made. I’m asking what your recommendation would be to the government regarding its decision, given the costs already incurred.
Ms. Hogan: The costs have already been incurred. The decision to change the approach is one that, I hope, will be based on what is best for the Canadian Armed Forces. The decision must be what’s best for the Armed Forces.
Senator Moreau: Regardless of costs?
Ms. Hogan: No, costs must be considered, but facilities will have to be improved for any aircraft that is acquired. They can continue improving facilities, and I believe that’s needed; facilities for training pilots are needed, as are facilities in the North. Not all the costs incurred will be lost.
[English]
Senator MacAdam: Welcome here today. It is nice to see you.
Regarding your report Delivering Canada’s Future Fighter Jet Capability, you mentioned that in 2018, when you last audited Canada’s fighter force, you flagged that one of National Defence’s biggest obstacles was a shortage of qualified pilots, and you alluded to that here today. The department at the time agreed with your recommendations in this regard, and six years later you’re saying that personnel issue is still the case. I am wondering if you can comment on why your recommendations from the previous audits have not been adequately addressed or why we’re in this situation we’re in today.
Ms. Hogan: Well, I think we’re in this situation — it’s slightly different than the situation in 2018. It’s obviously concerning that the same situation exists. I do believe that the Armed Forces has concerns and issues around recruitment, which is why we are actually going to be doing an audit as well on recruitment and retention in the Armed Forces. But this issue is a little different because now you’re transitioning between CF-18s and CF-35s. For a period of time, you will need qualified pilots to fly both. It is about upskilling and retraining existing pilots but also hiring new pilots and training them. What is concerning is while National Defence has a plan, that plan is predicting they will still end up with a shortage of pilots, and that is why something needs to be done now. What we found in our audit is a lot of their risk-mitigation strategies were very reactive. They waited for a risk and then designed a plan instead of getting ahead of it and mitigating it. I would like to see them change that approach, especially when it comes to pilots.
Senator MacAdam: Thank you.
I’m wondering if you could talk very briefly about how you select your performance audits — I know you mentioned a few audits like the ones on personnel or the housing for Armed Forces and things like that — and if you have many planned in the area of defence, which is something that is a big focus of government. Could you just review that?
Ms. Hogan: You have highlighted two that we have in the area of defence. We are looking at housing for the Canadian Armed Forces, but we are also looking at recruitment in the Canadian Armed Forces. We know that we want to take a look at the culture in the Canadian Armed Forces at some point.
The timing of some of these audits depends. We annually have a process where we do a comprehensive environmental scan, and not only do we look at the environment around us but we speak with deputy ministers and other senior officials across the government. We speak with senators. We speak with MPs. We look at requests that we get from the public or through letters from elected officials. We put it all together, and then we do a risk ranking in certain areas and design our audits. Right now, we’re looking at the audits for 2027, actually. But then we remain flexible to be able to respond to what’s going on around us and emerging decisions that the government might make or requests that we receive from parliamentarians. It isn’t a simple process, and we have many in our office who are involved in it. Ultimately, the final decision rests with me as to what audits we do.
We do have a few for the Department of National Defence, or DND. We are also looking at recruitment for the Royal Canadian Mounted Police, or RCMP, and we are looking at munitions supplies. There is a lot that we have planned in the defence/security realm, given many of the decisions recently that have been made around funding for those areas of the government.
Senator MacAdam: Have you ever got a request from the Senate of Canada to do a specific audit?
Ms. Hogan: There are some requests in reports that we had actually — the report that we just tabled last week on looking at registration under the Indian Act was included in a Senate report. We always pay attention to all of those, and then we try to triage them and put them into our risk ranking. As you can imagine, there is so much in the federal government, whether it be health care or housing or military/defence spending, security or IT systems. There is no shortage of topics. It’s just a matter of being timely and relevant with supporting parliamentarians.
Senator MacAdam: I absolutely understand. Thank you very much.
Senator Kingston: Welcome back. It is nice to see you all again.
I’m going to be asking about a housing piece that’s related to procurement. In your audit, you talked about office space and converting surplus properties into affordable housing. This was led by Public Services and Procurement Canada, or PSPC, and over the time frame of 2019-24, although they had a target, only about 2% of that was achieved. That kind of collides with the need for affordable housing and everything else that’s going on today. Prior to the pandemic, this was all taking place. You’ve said that Canada Mortgage and Housing Corporation, or CMHC, has been securing commitments to build 4,000 housing units by 2027-28 but that only 49% of these units will be ready for occupancy by that time. My questions are regarding PSPC and CMHC. What would you suggest to accelerate the reduction of federal office space and the conversion of surplus properties into affordable housing? What needs to be done right now to sort of bump that up?
Ms. Hogan: There is a lot going on and a lot of parties involved in all of this, and I’ll tackle it first about freeing up office space and then look at the transition and converting it into affordable housing.
Public Service and Procurement Canada has maintained their commitment to try and reduce office space by 50%, but their most recent plan, when they received money in Budget 2024, showed that they estimated they would only reduce it by 33%. A lot of that is contingent on some of the big federal tenants agreeing to space reduction, and many of them have not signed on to a space reduction agreement. Some of it is about getting federal tenants to agree to that in the first place. And then you can’t just walk away from a building, right? You need to make sure there is space in other buildings. There is the need to modernize or change the look of buildings so that you can move public servants, and then getting agreement from federal tenants to actually move. There are a lot of moving pieces that are affecting the lack of progress in that area.
I can tell you, for example, that we put up our hand, even though we do not pay rent. We are a federal tenant, and many federal tenants don’t pay rent, so there is that lack of financial incentive too from many departments. But we put up our hand and said, “We would like to reduce our footprint here in Ottawa, and can you support us in that.” I would hope that deputy heads across the city would consider whether they can do the same thing.
Then to transition to affordable housing, we found a few issues there. The buildings being made available are not in the communities where there is the greatest need for affordable housing. There is a bit of a disconnect sometimes as to what buildings are freeing up. I think a better plan into the future looking at that and being more targeted is needed.
I would encourage CMHC to be clearer with their reporting on affordable housing. While we said they are on track to meet their targets, their target is securing commitments, and commitments isn’t a place to live. I would like them to report on when those units would be available for occupancy also, but encourage them to ensure their measure of affordability has a link to a household income and isn’t linked only to median market rent because median market rent in Toronto is unaffordable for many individuals who live there.
Senator Kingston: Absolutely, and there seems to be an issue here in Ottawa for the need for deeply affordable housing, so some freeing up of buildings seems to be a good thing here in the city.
There was a study done prior to the pandemic that suggested that 50% of publicly or federally owned office space could be converted, but you say only 33% has been agreed to. How do you explain that? It’s a long time since. We’ve gotten into different ways of doing work and different expectations by employees about where they should do their work. Why are we so short of a target that was set before some of these things became very apparent to the public?
Ms. Hogan: You’re right that Public Services and Procurement Canada had identified well before the pandemic they thought 50% of federal office space was underutilized, not sitting vacant but not at its full capacity. It could mean one organization in one building on a few floors is under capacity but everybody else is at capacity. Having information to understand the daily usage of buildings is one of the things we identified was missing in order to be able to help more this forward.
On the approach to reduce the office space, the public service has grown, and then the public service has changed how it approaches work.
Senator Kingston: Yes.
Ms. Hogan: Pre-pandemic, buildings saw dedicated office space for an individual employee, and now that needs to be converted. I use the word “modernize” because you have to make it hoteling so that many occupants can occupy it over the space of the week. That takes time and money.
What we found between 2019 and 2024 is Public Services and Procurement Canada had no funding to do that. They received that funding in 2024.
Senator Kingston: Last year.
Ms. Hogan: Which is why we only saw a 2% reduction. I hope that will ramp up. It will still take federal tenants to agree to either move or reduce office space. It’s not going to be one person.
Senator Pate: Thank you to our witnesses.
You mentioned earlier, Ms. Hogan, the report on registration under the Indian Act. My question relates to that. Indigenous women are being told, again, to wait for equality. Bill S-2 is now the latest in a series of incomplete fixes to sex discrimination under the Indian Act. As the government once again asks Indigenous women to wait for the second generation cut-off and other injustices to be redressed, the findings of your report seem clear that the government has not approached registration — including of women and their descendents who were previously deprived of status — with the seriousness this issue warrants, in light of Canada’s obligation under domestic law and international commitments to equality, including through the sustainable development goals, as you highlight in your report. Your report identifies the department’s six-month service standard for registration was not made public and was not met 81% of the time. Are there other examples of which you’re aware where the department failed to meet a service standard to that degree?
Ms. Hogan: Can you repeat the question?
Senator Pate: Sure. Are there other examples of which you’re aware of a department failing to meet a service standard to that degree?
Ms. Hogan: The first audit that comes to mind would have been on providing services to our veterans where the service standard was consistently missed, and it was a lengthy time. That’s equally concerning as it is here, especially when you look at some of the priority cases of registrations under the Indian Act. Individuals who are older in age, who are elders or who have medical concerns, while waiting less than the average of 16 months, were still waiting 10 months, which is a really long time to wait if you have a health concern.
I think not only do they need more transparency in how long people are waiting and what the service standard is, they need to look at how to be more efficient because the time we have put in here — the 10 or 16 months — doesn’t include the time where the department would pause and wait for documentation from provinces or territories. That means individuals are waiting even longer than what we have listed here. That’s a concern.
The public service shows it can be more efficient if we look at how quickly important documentation, like a Canadian passport, can be issued. Why can’t we process a registration under the Indian Act in a more efficient way? We issued recommendations to help encourage them to find some efficiencies.
Senator Pate: Your report found that, for noncomplex cases, registrations were made on the same day 22% of the time, shoring up what you just said, but on average it took 44 days to make such decision. Did the department offer information to explain why they think six months is a fair service standard for those awaiting registration? Did you receive any information to explain why there is such a discrepancy in decision-making time?
Ms. Hogan: Why six months? I would have to ask someone for that level of detail. My concern there is you can make it whatever it is. It is how long is someone really waiting? That gives you a target to try to achieve. Clearly, it is not being achieved, so it’s time to look at your processes and figure out a better way to be efficient.
You started off your first comments with the discrimination. Some of the changes in the act in 2017 and 2019 were meant to remove that discrimination. When we looked at this audit, we were hoping to see those might have been treated differently, but they are just in the mix with all the others, so they wait. In fact, many of them are sitting in the backlog of files. I do think the peak of requests because of those legislative changes is part of the reason why it’s taking so long. They might have a resource issue that they would need to identify, but I do think they can find more efficiencies in their processes as well.
Senator Pate: The funding is one thing you did mention. I was going to ask that.
I am also curious, if you were me or one of us, what questions would you ask the department when they appear before us?
Ms. Hogan: I would like to think we asked them all during the audit. You could get answers from them, which I always encourage you to do, as to why so long. Why 16 months? Why 10 months? The segregation is between head office for complex and regional offices for noncomplex, so it’s clear that some can be processed quickly.
I would ask them about funding to partners. The trusted sources or the community-based registration administrators are meant to be the first step in transitioning all of this to First Nations communities. What we found is that the funding there hasn’t either been updated since 1994 or is a minimal amount such that it doesn’t even represent the minimum wage of a person working for one day a week. If you really want to transition this out of the public service and back to communities, then you need to ensure that the communities are properly funded, trained and equipped to take this on.
[Translation]
The Deputy Chair: Thank you very much. I will let the official chair take the chair.
Senator Claude Carignan (Chair) in the chair.
[English]
Senator Galvez: Thank you so much, Ms. Hogan, for being here today to answer our questions.
Reading your reports, unfortunately, these report findings show persistently that there are challenges in governance and in delivering. We have limited centralized oversight. We have incomplete risk assessment. We have overreliance on outsourcings, cost escalation in major procurements and insufficient performance monitoring. We discussed some of this yesterday with the budget officer.
For me, one important thing is to be prepared for crises. It’s extremely important in these times. Given rising systemic risks, such as climate disasters, wildfires, cybersecurity threats, the economy and the tariff story, does your office believe that the estimates reflect adequate funding for preventing or managing these risks, building resilience and having emergency preparedness?
Ms. Hogan: I’m confident that Andrew is going to want to jump in on this, so I’ll try to be brief.
I would point you to an audit that we did on emergency preparedness in First Nations communities. We found that the government spent more money on responding than preventing. That is a shift that I think we definitely need to see in certain aspects. Now, there are things that are unforeseen that you will never be able to predict and get ahead of, but dealing with certain elements and being more preventive would be less costly in the long run for the government.
I know Andrew probably wants to talk a bit about the lessons learned.
Senator Galvez: I just got back from Geneva, where the United Nations held a platform on risk reduction, and plenty of the strategies were described there. Unfortunately, as you just mentioned, we focus on being firefighters, and we don’t do much prevention. Maybe it’s because we are unaware of the cost savings that come with prevention.
Andrew Hayes, Deputy Auditor General, Office of the Auditor General of Canada: Thank you. I think that is a very powerful message. An ounce of prevention is worth a pound of cure is one of those things that government can take into account as they’re forecasting.
I wanted to highlight that the Commissioner of the Environment and Sustainable Development last week also tabled a report on the National Adaptation Strategy, and I think it talks to many of the points that you’re raising. Among his concerns, the government did not effectively design the adaptation strategy, and we were one of the last OECD members to deliver an adaptation strategy after many years of commitments and audit recommendations on that. Some of the concerns he raised about the strategy are that it did not include an economic analysis of the appropriate resources, and it did not have an effective framework for measuring, monitoring and reporting on results. It also didn’t have targets that deal with some key health risks like Lyme disease and wildfire smoke. Ultimately, the government needs to be forward thinking and address the economic, social and environmental aspects. That takes us to his lessons learned, where the commissioner put six important lessons learned down over almost 30 years of environmental and sustainable development auditing that our office has done.
Senator Galvez: Thank you.
On that same subject, Ms. Hogan, in your view, does the current structure and presentation of the Main Estimates and Supplementary Estimates (A), given that we don’t have a budget, provide parliamentarians with sufficient transparency to fulfill their oversight role, especially in the absence of, as I said, a budget, with respect to major initiatives like Bill C-4 and Bill C-5, which are definitely going to be costly?
Ms. Hogan: It’s unusual to start a fiscal year and not have a budget. It’s happened before, but it is very unusual, so you are required to look at other mechanisms. I think a budget encourages global transparency.
One of the things I would tell you about some of the estimates is that almost 60% of what is voted in estimates is statutory in nature, so it exists in laws. Really, the other 40% is where a lot more transparency and accountability are needed, and that is up to, I think, parliamentarians, as you are doing now, trying to ask questions and get some clarity on all of that information. I think that hearings like this are a good way to get that clarity, but the budget is the ultimate clarity for everyone.
Senator Loffreda: Welcome, Karen, Andrew, Jean-René and Paule-Anny to the Senate Finance Committee this morning. It’s great to have you here.
I have always lived by the motto, “Listen first and speak last.” There are advantages to doing that. We have covered a lot of territory, but I’d like to pivot slightly. What haven’t we covered? I’d like to ask a question not related to your recent reports. I think you’ve covered that very well. Congratulations; you do great work and are always very insightful.
You are appearing before us today as part of our committee’s study of the Main Estimates and Supplementary Estimates (A), so I would like to focus on your office’s request in the Main Estimates. I note that your office expenditures for 2023-24 were $134.9 million, and the estimated amount for 2024-25 is $136.2 million, which is also the amount requested in the Main Estimates of the current fiscal year. I have two questions and a supplementary, if time allows.
First, I see no additional funding requested in Supplementary Estimates (A). Do you anticipate making additional requests in Supplementary Estimates (B) or (C)? Historically, does your office typically seek additional funding beyond what is requested in the Main Estimates?
Second, given that your funding for 2024-25 remains largely unchanged from the previous year, should we take that as an indication that your office is adequately resourced to fulfill its mandate? Do you feel that the funding level is sufficient to meet your operational needs?
Ms. Hogan: Our budget comes in the Main Estimates. The majority of our funding is there. It only gets adjusted for economic increases for salaries, so we don’t typically make any other requests, and we have no intention of making other requests.
Are we adequately funded? Well, we have sufficient funding to do the work we’re doing now. If Parliament would like to give us more funding and we can deliver more work, we’ll never say no. I don’t know a good auditor who will say, “I don’t want to do another audit.”
Some of the funding that we receive is meant for some of our internal measures, such as our IT systems and upgrading that was long overdue. We are struggling a little bit with spending some of that because we are dependent on other partners in the public service to support us in doing that spending. Each year, we don’t spend everything that we’re given partially because of that.
I think this past year was a very unique year as well. We usually get some top-up for salaries in Supplementary Estimates (C). Because we didn’t get Supplementary Estimates (C)s — no one received that — we had to pause some internal activities. Because all of that money is linked to salaries, we had to slow down certain things internally. Then, near the end of March, we were given some of that funding. Obviously, we can’t spend that in a prudent way with a few weeks to go. We’re going to have a couple years of not spending our full appropriations, but our intention is always to spend it all.
Senator Loffreda: Thank you for that.
If I look at 2025-26, the Office of the Auditor General is requesting a 6.9% increase in funding for that year. Could you break down the main drivers of that increase? That is particularly in the context of your 2024-25 planned spending decrease, I guess, if you want to call it that. How will these additional resources enhance your audit capacity or mandate delivery? Why the 6.9% increase, given what you just said?
Ms. Hogan: Every year, when you know you don’t spend, I think the term in the public service is you ask to reprofile it. You can carry forward 5% of your budget and ask for it to come in the next year, so what you’re seeing is our request to ask for some funding. Some of it was earmarked on a capital project, so that is separate from regular operating funds. Did I do that justice? I want to make sure I explained it well. It isn’t a budget increase. It’s just us saying, “We didn’t spend it all. Could we spend it next year?” Almost 90% of our Main Estimates is spent on salaries.
Senator Loffreda: Thank you.
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Senator Dalphond: Following up on what Senator Loffreda said, I also have questions about your budget. You said it was $136 million. How many employees do you have?
Ms. Hogan: We have about 750 full-time employees.
Senator Dalphond: Are you using the government’s pay management system? Do you have your own pay management system?
Ms. Hogan: We are public servants. We are all paid through the Phoenix pay management system. However, pay is managed by employees at our office. They look at the details closely. We have very few errors in our pay. We’re very lucky on that front.
Senator Dalphond: You anticipated my next question. At the Office of the Auditor General, pay is nearly 100% accurate?
Ms. Hogan: I don’t know whether it’s 100% accurate, but there are very few pay errors. Most of the time, if someone doesn’t get paid the right amount, it has to do with the fact that they’ve come from a different department and it takes time to transfer all the human resources files needed for pay to be entered correctly into Phoenix.
Senator Dalphond: In terms of office space, do you have a policy for reducing the amount of space you use, for hotelling, as you said earlier, instead of having permanent offices that aren’t necessarily always in use?
Ms. Hogan: Absolutely. As with nearly all other departments, everyone had their own designated office before the pandemic, but we noticed that some of our employees, including auditors, had to be at client locations from time to time and at the office. We didn’t need all of our space, so we began renovating and reducing our spaces in Ottawa. We currently use four floors and are trying to return two of the four floors for hotelling. We’re working on two floors while construction is being done on the two others.
Senator Dalphond: The space you need will therefore be reduced by about 50%?
Ms. Hogan: In Ottawa, yes, about 50%. We have regional offices, and, each time our lease is renewed, we do everything we can to reduce the amount of space we rent, because we want to make room for hotelling in our regional offices. Many people in the regional offices serve the North, and they are often in the territories, so we don’t need much space.
Senator Dalphond: Have you been able to make the changes with the budget needed to convert offices into hotelling spaces? You are saying the budget... Everyone wants to reduce space, but the problem is that there isn’t enough money to pay for the conversions. Were you able to obtain the necessary budget?
Ms. Hogan: It’s not in our budget. The budget for reducing and renovating office space is managed by Public Services and Procurement Canada. We made a request, like all other departments. We’re lining up for the changes. They really are the ones managing the project, and we’re the clients. Would I like things to move faster? Absolutely. As with any renovations, we would like things to move faster to accommodate our employees. There are some delays, but we are still well served on our two floors.
Senator Dalphond: Are you concerned by the fact that the defence budget will be doubled, maybe even tripled? Looking at your report on the F-35s, I noticed that many elements weren’t considered during planning. If the budget is doubled or tripled, there will be ships, submarines and bases. Are you worried or reassured by the department’s response to your suggestions?
Ms. Hogan: I don’t know all the details of the budget increase, but I believe part of it relates to salaries. A portion of it will be spent. There is a shortage of personnel. That’s exactly why we’ve initiated an audit on recruitment at National Defence, to help the department understand the reason for the shortage. The issue was flagged in our report on fighter jets.
For large-scale projects involving fighter jets, submarines, ships and the like, it’s also important to expect that there will be delays if requirements change during the project. When delays arise, the spending is pushed ahead into the future — so, yes, I’m concerned. In our report on fighter jets, we made a recommendation that expenses be monitored much more regularly and closely, but we also discussed risk management in large-scale projects such as the purchase of fighter jets. National Defence had noted that inflation and fluctuations in foreign currency exchange rates were significant but didn’t monitor them.
Senator Dalphond: Thank you.
Senator Forest: One of the topics is office space. In your report on federal office space, you stated that the government hopes to reduce federal office space and save $3.9 billion over the next 10 years. However, we can see that space hasn’t really been reduced since 2019, with 6 million rentable square metres in 2019-20 dropping to 5.9 million. That’s a very slight reduction. Were the anticipated savings included in the budget, that is, savings that should have been made but that did not materialize?
Ms. Hogan: I don’t think you’ll find savings in the budget; they are expenditures. You’ll find expenditures instead of revenue in a budget. At this time, the government needs to pay for building maintenance and make payments for property taxes, payments that replace property taxes. As long as the government occupies a building, those costs will exist. Once a building is freed up and sold, those costs are no longer incurred. It’s really more an estimate of the expenditures that won’t have to happen rather than revenue in the future.
We also asked Public Services and Procurement Canada to be clear with the information. If it sold a building, what did it get from the sale? That information is hard to find. It will be in the public accounts, but it’s hard to find. We also encouraged transparency on this.
Senator Forest: When a building is sold, in your opinion, should the proceeds from the sale usually go towards capitalization, since the building was capitalized, not towards the current operating budget?
Ms. Hogan: Yes. There are accounting standards and other important aspects when selling a building, but there is currently a significant lack of transparency for information on office buildings. We compared the situation with that in Australia, which has much more information publicly available. This information is necessary, in my opinion, to improve office space management. It’s great to know how many square feet there are, but it’s also important to know how space is used day to day to be able to fix the puzzle, move the people in the buildings and free the buildings up for sale.
Senator Forest: Essentially, it’s not really good management if we sell off our assets to pay for groceries. It should normally be put towards capitalization.
Ms. Hogan: Yes.
Senator Forest: As for affordable housing, I want to thank you for highlighting in your report that the sale of land is mainly aimed at supporting rental housing at this time. The need exists, however. I met with representatives of Ronald McDonald House, representatives of organizations assisting families and children, and representatives of shelters that help victims of domestic violence. They lamented the fact that federal programs do not meet their needs. I don’t understand why the objective couldn’t be broadened. We’re told the reason is that this type of project requires additional and ongoing support, for the day-to-day operations of homeless shelters, for example. These people are not asking for their operations to be funded; they are asking for assistance with capital assets. I therefore don’t understand why support isn’t broadened to include these projects.
Ms. Hogan: That is why we mentioned it in our report. There is a whole spectrum of housing. Looking at affordable rental housing alone, a big part of the housing spectrum is missing in relation to homelessness. When we asked why that was the case — because the previous program, the Federal Lands Initiative, was for other types of housing — the Canada Mortgage and Housing Corporation told us that a lot more money is needed for the support services for other housing types. So they focused on affordable rentals. We recommended reviewing the previous program to draw lessons from it because it was possible before.
Senator Forest: Those people are not asking for operational funding but rather capital funding. That is an excuse made by the Canada Mortgage and Housing Corporation.
Ms. Hogan: Third parties also typically offer support services, so it is not just up to the individuals who build or renovate buildings to create affordable housing. Coordination with other organizations is needed.
The Chair: I have a question on the same topic of housing and making buildings available.
Yesterday, witnesses from Public Services and Procurement Canada appeared before the committee. Today, I am hearing the terms “sale of buildings” and “making buildings available”. I have not heard anything about bidding for projects, though. I have a federal building and I launch a competition to develop a project in which I will make the building available and try to generate the maximum economic benefits possible, whether in relation to heritage, culture or other areas. I have not heard anything about that concept. Does that exist, from what you have seen in federal departments, in relation to making buildings available, holding a competition for a project or being able to measure the benefits in some other regard beyond the mere selling price?
Ms. Hogan: The Federal Lands Initiative, which is managed by the Canada Mortgage and Housing Corporation, hold competitions; bids have to be submitted before land or a building is offered under this initiative. Those bids are analyzed. We talked about that a bit in our report.
Instead of examining the process, I focused instead on the results to determine how many buildings were available and whether they were affordable. There is indeed a whole bidding process and the best bidder is selected.
The Chair: So there is no report assessing the quality of the projects and verifying whether the project delivered was in line with the call for tenders. You do not assess the quality of the project?
Ms. Hogan: Very few projects have been completed, as you saw in the report. They are all commitments to build, but very few have been completed.
We can see that the affordability requirements included in the bids have been met, but that is based on market rental rates and —
The Chair: If that is affordable, it is expensive.
Ms. Hogan: — not on household income.
The Chair: My next question pertains to the maintenance of the F-35s. I know that Senator Gignac raised this topic, but I was not here, so I did not hear the exact question and answer.
A company in Mirabel, L3Harris, maintains the CF-18s and could maintain the CF-35s. On the one hand, there are the timelines, and on the other, the possibility of getting a contract. There could be a gap as a result of that transition, even if an F-35 maintenance contract were awarded. If that is not done quickly, workers and qualified staff could be lost. Have you identified or noted those negative effects of the timelines for awarding the maintenance contracts, considering the gap that will arise if L3Harris gets the contract?
Ms. Hogan: We did not look at any specific buildings, but rather National Defence’s overall plan to receive the aircraft; that includes the staff responsible for maintenance of the aircraft.
We found that the plan showed that there would be enough staff, but that is something that is monitored closely. Our report made findings about the fact that it is the management office in the United States that determines whether National Defence is ready and whether a building is ready. That raised concerns relating to the workers who maintain the aircraft.
I think National Defence should keep an eye on that; that is all related to our recommendations to much more actively monitor the risks and attenuation measures. They should not be reactive, but proactive, as far as workers are concerned.
The Chair: Thank you very much.
[English]
Senator Marshall: Ms. Hogan, you were speaking earlier about your employees. What’s the biggest challenge with regard to employees? Is it recruitment? Is it training? Is it retention? What are the issues that you are grappling with?
Ms. Hogan: In our organization, it is not recruitment. I think that we have an excellent mandate, and we have typically no problem recruiting individuals.
We have been trying very hard to meet certain employment equity targets, and we struggle with hiring of Indigenous people, so we’ve been working very closely with some Indigenous schools to help us with that. We’re part of a CPA program to encourage Indigenous people to join the profession. Some of our auditors need a CPA if you want to sign off on financial statements, but many of our auditors are not CPAs. We are looking as well at the requirements that we have. Typically, we ask for a master’s degree or a professional designation, whether you be an engineer or a lawyer or an economist. There are so many professions. We are trying to overcome some of those barriers to help with changing the look of our organization.
We do not have a retention problem. In fact, I would tell you that our attrition rate is very low. I think last year it was about 4%. Our concern there is that it is more in our younger hires than in our management hires. What is it within our culture that is causing young people to leave when they arrive? As I said, we had issues with IT systems, so we’re trying to invest in that. I think some of that will help overcome that.
We always have official languages that are a concern. As you move through the ranks in an organization and you start to manage people, you need to be able to speak both official languages, so we always have to make sure we have enough time to train people.
Senator Marshall: For the majority of your employees, is their sole experience within your office, or do you have a substantial number of employees who have outside experience either in the private sector or in government departments or organizations?
Ms. Hogan: I think I would tell you that prior to my arrival as Auditor General, the majority of our organization was home grown, as you say, from within, but we’ve definitely seen a big shift in that. I truly believe in going to get expertise when we don’t have it, knowledge of the public service. Most of our new hires were from external throughout the pandemic. We were about 500 people, and now we are about 750, so it’s a big change. In fact, Jean-René Drapeau and Paule-Anny Pierre came from other departments in the public service, and I went to get them to bring that expertise and knowledge to the organization. I see the value in making sure that we diversify our experiences.
Senator Marshall: Thank you.
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Senator Gignac: Now, I’d like to move on to another topic, one that is becoming increasingly important in the federal budget. It’s not a criticism, however, previous governments have sorely failed to support Indigenous communities. Since 2015, the amount has increased from approximately $11 billion to over $35 billion; so it has tripled, and much work remains to be done.
I’d also like to talk about actuarial liability. With regard to reconciliation with Indigenous peoples, based on the most recent estimate I saw — Parliament prorogued, then dissolved, but there’s been no budget — I believe the Parliamentary Budget Officer talked about $75 billion. Do you have any new estimates? Even though I believe I know how it works, could you tell us, from an accounting perspective, at what point does it influence the deficit?
If I’m not mistaken, last year, the finance minister predicted a $48 billion or $50 billion deficit, which ultimately reached $60 billion. This leads, then, to volatile budget projections.
Could you speak more about that volatility as it relates to budgetary deficits? That said, we aren’t questioning the hard work being done in that regard now and going forward.
Ms. Hogan: With regard to financial statements, contingent liability is subject to numerous risks and uncertainties. The notes to the financial statements include many disclosures on that.
When it comes to contingent liabilities with Indigenous peoples, we are talking about the deficit for the fiscal year being reported. For example, if, this year, we estimate that amount will be $5 billion, the current year will be included in the deficit. Then, if that amount is repaid within the next two years, it will not be included in the deficit. However, if the amount is more than the reported amount, the difference will be included in the annual deficit. Last year, in terms of the discrepancy between the budget and the deficit, a number of elements were included, one of the most important of which was the Indigenous communities payment, which was greater than the liabilities.
There can be a number of explanations for a discrepancy between the budget and the actual deficit, including uncertainty due to a legal opinion or ruling as well as hypotheses and projections involving estimates. This takes a great deal of our time during the annual audit of the government’s financial statements, and these are key elements enumerated in our independent audit report. The report will list the measures we take when we undertake these audits.
Senator Gignac: Nevertheless, we are talking about significant amounts of money and many legal firms are involved. With all due respect to my colleagues who are lawyers, in your opinion, is everything done by the book? We know the longer the process, the more expensive it will be for government, and that’s a significant amount going to intermediaries before it reaches Indigenous hands. When did you last look at that issue? Do you have a really high comfort level? I repeat that we are talking about sizeable amounts of money and a long process.
Ms. Hogan: Yes, those are large amounts, with all due respect to my colleague beside me, who is a lawyer. We examine the risk assessments provided by the lawyers concerning the potential payment amounts, but we don’t look at the associated legal fees, if that’s your question. Rather, we look at the analyses we are provided. Those analyses often include redacted information, which slows down our work and makes it more difficult. That is troubling. I asked for a legislative change quite some time ago to make clear in the legislation that we can have access to the sensitive and confidential information provided by the lawyers and that falls under their privilege. It would certainly help us to work faster. The answer then is no, we don’t examine the legal fees paid to lawyers.
Senator Moreau: You note in one of your audits relating to GC Strategies that, in emergencies such as COVID-19, the federal government and some provincial governments dropped a number of accountability mechanisms. You will no doubt agree that, during a specific or one-time emergency, simplified measures could facilitate the awarding of contracts at a time when procurement is becoming a concern.
Did you issue any guidelines about measures that should be implemented when the usual accountability measures are pared back during emergencies? What measures should be maintained to ensure a proper audit can be done? I see that sometimes we’re paying without really knowing whether the service has been provided or we’re giving contracts to unqualified individuals.
What would be your main recommendations to determine whether those measures should be maintained to ensure the contracts awarded and the services provided match, whatever the situation?
Ms. Hogan: During the pandemic, the Secretary of the Treasury Board sent a letter to the entire public service saying that it was an emergency and that our usual processes could be simplified to some extent. However, he was very clear about the need to ensure proper accountability and to properly document the decisions made and the reasons for those decisions.
In my opinion, an emergency is not a reason to ignore the rules; some fundamental rules still need to be followed. Our audit on the professional services contracts covered a longer period than the pandemic, we audited contracts between 2015 and 2024. The results, then, do not just cover the pandemic years, but also the years before and after the pandemic.
That is why I asked the government to take a step back to try to understand why we were seeing that kind of behaviour. Is it because there are too many rules? Are the rules not well known? By trying to provide service quickly, are people being encouraged to circumvent the rules? I think it’s time to step back and say that contracting needs to be far more efficient than it is right now. We need to find a way to support small and large companies so they can participate in federal procurement.
Senator Forest: Thank you.
[English]
Senator Kingston: I will go back to the same thing we were speaking about before. We were talking about properties being converted into deeply affordable housing. To what extent did the prioritization of properties suitable for conversion to housing delay the disposal of other properties? That was talked about in the explanation, I guess. Also, what are your recommendations to address that particular issue?
Ms. Hogan: Ten projects were identified as priority projects for a pilot to see if the government could expedite the steps it goes through to decide if a Crown asset can be disposed of and declared surplus. That is one aspect we looked at, and it is too early to know whether that will result in a quicker identification of assets for disposal.
However, we did identify that, when Budget 2024 came in, giving the government some money to downsize, it also said to please prioritize buildings that can be converted, so some buildings that might have been slotted earlier on were put aside and others were focused on. The concern there is that you’re still going to pay maintenance and operating costs on old buildings or buildings that are not being used to capacity. You still have payments in lieu of taxes. All of those decisions result in an opportunity cost. There is the question of which should be prioritized: those that can be used for affordable housing or just disposing and reducing the footprint. That’s a decision the government has to make, but both of them come with pros and cons.
Senator Kingston: Are you thinking of the ones that can’t be converted as low-hanging fruit in terms of cost savings? Is that the issue?
Ms. Hogan: It depends on how quickly they could be disposed of. The 10 priority buildings were identified because they could be quickly vacated and people could be moved, because no building is sitting empty with no one in it. It’s up to the government to prioritize, but each decision comes with an opportunity cost.
Senator Pate: I want to follow up on two things.
One of the arguments made for the government failing to provide adequate resources for the registration under the Indian Act — and my fear is that we’re going to see this again with Bill S-2 — is that they had no money, so the onus was on communities to figure out how to fund it. What avenues do you think are available to the department to provide resources to communities?
The other question relates a bit to what Senator Galvez said, but in a different context. The costs of lawsuits to remedy discriminatory policies and practices are huge. When you’re doing audits, how often are you weighing in on those, perhaps informally, or would you consider putting those in future reports, estimations of what could have been saved had we not had to see these successive lawsuits?
Ms. Hogan: It’s unfortunate that many First Nations communities resort to a lawsuit, but things are moving slowly, as we saw in the registration under the Indian Act.
When it comes to funding of trusted sources and community-based registration, I think the first place to start is to actually update the funding model from 1994, which is based on the number of registrations and per capita. That’s a really long time to not update your funding model, and it likely does not reflect just the mere cost of inflation. The changes to the act have caused an increase in requests. I think these were things that the government could have seen coming and could have planned to increase their resources ahead of time.
A meaningful conversation with First Nations communities about what they need to support them is needed. We did see here that when Indigenous Services Canada didn’t have a regional office, they actually went to Crown-Indigenous Relations and Northern Affairs Canada. They’re trying to collaborate together, but now it is really meaningful collaboration with First Nations communities that I think is needed.
The public service can deliver these kinds of things quickly. We see it. As I mentioned, I compared it to passports, so asking how they can speed this up is essential.
Mr. Hayes: Maybe I could just give a shout-out to the Reports of the Commissioner of the Environment and Sustainable Development, Lessons Learned from Canada’s Record on Sustainable Development. Lesson 4 was about engaging with Indigenous governments and people and honouring Canada’s commitments. One of the opportunities that the commissioner signalled was that Indigenous governments and peoples are emerging leaders in areas of social transformation and novel approaches to address today’s challenges. Looking at Indigenous governments and peoples as partners as opposed to people who are accessing services is an approach that the commissioner is advocating for.
Senator Pate: Thank you.
Senator Galvez: It’s evident that right now we are facing complex conversions of public policy pressures. We are talking about defence expansion, the housing crisis, the health care strain, and with all of this comes a labour shortage. You talked about needing to increase recruitment in the Canadian Armed Forces. We need pilots. We need trade workers. We need nurses, doctors and information technology people, et cetera.
Has your office said whether the federal government has the capacity, coordination mechanisms and planning tools in place to implement these priorities without duplication, bottlenecks or systemic non-delivery? I’m asking that because we are going to accept another wave of immigration to satisfy all these labour shortages, and then we are going to again be in this housing problem. At what point are we going to stop this vicious circle?
Ms. Hogan: We have not taken a step back to look at how the federal public service hires or trains or how they support having more doctors. We haven’t done that. Some of those elements are under provincial government regulation or territory versus the federal government.
It is a complex web of interrelated issues, and we are trying to look at it in certain areas. We are going to be looking at recruitment at the RCMP. We are going to look at recruitment at the DND. We are trying to focus in where we can and provide some support, but that bigger global picture is one I would expect the public service is feeding to parliamentarians as they make decisions. That is really up to them to provide that information to decision makers and lawmakers.
Senator Galvez: Do you have any latitude to have a holistic view or do a holistic status? All of these are interconnected.
Ms. Hogan: One of the unique things about our organization is that we can take a step back and look at things horizontally across the government and the way it’s managed with very different departments. I hear your concern, and maybe I’ll add that to our list of potential audits. It would be an interesting one to try and wrap everyone’s mind around. I agree with you that better coordination is something that is definitely needed instead of the government taking a siloed approach to a big issue like this.
Senator Galvez: Thank you.
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Senator Dalphond: I have a suggestion, if the Auditor General is interested in legal fees. I understand that these are external fees and not fees imposed by the Department of Justice, which represents the government in all those cases. There are regulations. There are class actions, decisions by the courts and all the regulations include a provision on legal fees. It’s a public document.
Ms. Hogan: Yes. As I indicated, I often look at the fees for professional services, which includes lawyers. The last two reports did not examine legal fees, but rather fees for information technology.
[English]
Senator Loffreda: An area of increasing importance, I guess, is procurement. If we look at your procurement integrity following your GCStrategies audit, your audit on GCStrategies revealed persistent non-compliance with procurement rules, echoing past concerns from the McKinsey & Company audit. Given this pattern, would you say these are isolated lapses or signs of systemic weaknesses in federal procurement culture, and what accountability mechanisms do you believe are missing or are underused?
Ms. Hogan: I have no reason to believe that what I found in the two audits I did on professional services contracts — the first one linked to contracts with McKinsey & Company and this one linked to GCStrategies — I have no reason to believe that it is limited to just these two vendors that I looked at. There were 20 federal organizations in the first one. There were 31 federal organizations in this most recent professional services contract, so I do believe that this is something that is more widespread. That’s why I think the government needs to figure out what it is within the procurement rules that is causing staffing companies to be the avenue that is being used to get skills and work that the federal government needs, and also why are public servants not following these rules?
Coming to accountability mechanisms, I think there are individual accountability mechanisms for a person who is actually exercising delegation of authority. You can take away that delegation, and before they can issue more contracts, you have to give them some training and so on. Then there are oversight mechanisms that I would expect would kick in and find all of this.
I think it’s time to just go back to the basics when it comes to procurement, because the rules are easy to follow, and they’re just not being followed.
Senator MacAdam: I have a question on your Current and Future Use of Federal Office Space report. You made seven recommendations: one to Treasury Board of Canada Secretariat, four to Public Services and Procurement Canada and two to Housing, Infrastructure and Communities Canada. Are you satisfied with their document responses to your recommendations and the timelines they have indicated for completing action on those recommendations? That’s my first question. Secondly, will this report be dealt with in detail by the Public Accounts Committee? Thirdly, will you be following up on these recommendations?
Ms. Hogan: Am I satisfied with the responses? Well, they have all agreed with our recommendations, and I think that more detail is provided when the Public Accounts get a detailed action plan. It is really difficult to give a sense here. My conversations with them are that they are taking our recommendations seriously.
I’m still a little concerned about the affordability measure and so on. This is the second time we’ve issued that recommendation to Canada Mortgage and Housing Corporation. We did so under our first work, where we looked at chronic homelessness, so I really do think affordability should have a link to household income.
Time will tell whether or not they will act on them, which is linked to your third question, which was about follow-up. We are going to be issuing a new product. We have heard parliamentarians say they want us to follow up, so in the coming year, we’re going to be working on doing that. We’re going to pick a few years and start following up more regularly on our recommendations, and then eventually expand it. This will eventually be put into that mechanism to be followed up on.
I don’t know whether the Public Accounts Committee will be looking at this. I think we’re meeting with them this week. I have a hearing with them on Thursday and will encourage them to study this, but I don’t know their detailed work plan at this time. We have some previous audits they haven’t looked at yet. I would also like to encourage them to study those as well.
[Translation]
The Chair: That concludes our first panel.
Thank you very much for your participation. As usual, your answers were very detailed and relevant. I wish you a good day. No doubt, we will see each other again in the coming weeks.
We are pleased to welcome with us today, from the Department of National Defence, Mr. Jonathan Moor, Assistant Deputy Minister and Chief Financial Officer, Lieutenant-General Kelsey, Vice Chief of the Defence Staff, and Ms. Nancy Tremblay, Assistant Deputy Minister, Materiel. We sense that you will be very busy over the coming weeks and months. We are delighted to have you here today to learn about National Defence’s past and future plans.
We will now hear opening remarks from Mr. Moor.
Mr. Moor, the floor is yours.
[English]
Jonathan Moor, Assistant Deputy Minister and Chief Financial Officer, Finance, Department of National Defence: Good morning, everyone.
Chair and members of the committee, thank you very much for inviting me to present the 2025-26 Main Estimates and the Supplementary Estimates on behalf of the Department of National Defence and the Canadian Armed Forces.
Today I am joined by Lieutenant-General Stephen R. Kelsey, Vice Chief of the Defence Staff, and Nancy Tremblay, Associate Assistant Deputy Minister, Materiel.
Through the Main Estimates, National Defence is requesting $35.7 billion. In addition, through the Supplementary Estimates (A), DND is requesting a further $8.7 billion in support of meeting the target of 2% of gross domestic product in defence expenditures this year.
When approved, National Defence’s budget will increase to $44.34 billion this year, and this funding will support a number of key commitments in addition to supporting critical operational requirements. With this in mind, our main priority is to ensure that our military members have the right tools and equipment they need to perform the vital tasks we ask of them to defend Canada and its interests.
The Main Estimates represent an increase of $5.1 billion — or 16.6% — over last year’s Main Estimates. The majority of these investments reflect increased funding in capital expenditures, which includes the acquisition of a fleet of CMMA, or Canadian Multi-Mission Aircraft, to patrol our coastlines, and the acquisition of a number of remotely piloted aircraft systems and, in April of this year, the start of the construction of the first River-class destroyers at the Irving shipyard in Halifax.
Through these estimates, DND is also allocating $100 million to repair and maintain Canadian Armed Forces infrastructure across Canada, including housing. We will also deliver key commitments to our allies, which include $458 million in contributions to NATO and $434 million for continued military aid and equipment for Ukraine.
As announced last week by the Prime Minister, Canada will meet the NATO spending target of 2% of GDP on defence this year. To reach this target, the government is investing an additional $9.3 billion on defence and security through National Defence and some other government departments.
Through this funding and in Supplementary Estimates (A), National Defence is requesting an additional $8.7 million.
The supplementary estimates will provide a $2 billion investment in recruitment, retention and support programs for CAF, the Canadian Armed Forces, aligned with the government’s commitment to accelerate the recruitment of new members, to retain existing members and to improve health services for serving personnel.
Through the supplementary estimates, National Defence will also allocate $2.1 billion in support for the Canadian defence industry by developing a defence industrial strategy to assist Canadian industry to develop greater capacity and capability and to provide critical equipment and support to the CAF.
National Defence will continue to invest in strategic military capabilities to help grow and introduce new capabilities, for example, the Joint Support Ships, Arctic over-the-horizon radar, domestic ammunition production and additional logistics vehicles, to name just a few.
We will also continue to invest in maintaining and improving existing equipment, infrastructure and digital tools in support of our members. The supplementary estimates include $833 million for a number of procurements which will include defence equipment and personal gear, the modernization of range and training infrastructure, the expansion of ammunition facilities, as well as maintenance, repairs and upgrades to the department’s real property portfolio.
Finally, through the supplementary estimates, National Defence is seeking $180 million to enhance cybercapabilities which will support greater interoperability with our allies and partners, and to enhance network infrastructure, information management, connectivity and data storage. National Defence will be supported by CSE, Communications Security Establishment, to implement these initiatives. They are also seeking funding in the supplementary estimates.
National Defence has plans in place to deliver for Canadians and our allies, to defend Canada and help protect the global world order. The funding requested through these estimates will support National Defence and the Canadian Armed Forces in carrying out its essential operations, programs and initiatives.
In conclusion, Mr. Chair, the Department of National Defence and the Canadian Armed Forces continue to deliver on our core national mandate while ensuring good financial accountability and effective resource management. The funding we are requesting through these estimates is critical to protecting Canadians and supporting our allies and partners against threats now and into the future.
My colleagues and I would be pleased to address any questions or comments you may have. Thank you very much.
The Chair: Thank you very much. We will start our first round of questions.
Senator Marshall: Thank you to the officials for being here.
My question is directed to Mr. Moor. The department will receive a substantial increase in the budget now once these two supply bills are approved — and they will be. I am wondering how you will implement all of these increases over the various programs within the department because, historically, the department has lapsed significant funding. The Parliamentary Budget Officer, who testified last night, said that he has seen no plan with regard to the implementation of the increases. We haven’t seen your departmental plan for 2025-26, so we don’t know how you’re going to implement these increases. We’re already three months into the fiscal year, so you’ve got nine months to pivot and deliver. The funds are spread over various programs, so can you give us some idea as to how you’re going to implement these significant increases in the next nine months?
Mr. Moor: Thank you for the question.
I agree it is a challenge. It’s going to be a significant amount of funding which we will need to spend in this financial year. I’m pleased to say we do have a plan. We’ve identified the plan to spend money in areas where we already have contracts in place. We already have proposals in place as well. For example, in these supplementary estimates, we’ve identified quite a significant increase in Vote 10 contributions, which means paying our partners and industry funding to actually start working on our behalf.
We have also briefed the Parliamentary Budget Officer. I am pleased to say that, last week, we briefed the PBO on our 2% of defence. But it’s all very quick, and it’s all very new. The announcement was only made last week, so we are working on developing our plans and maturing those plans.
Senator Marshall: When can we expect to see the plan? Usually by now, we’ve seen the departmental plans of your department and other departments. We’ve been waiting. We keep checking the website. It stays it will be released in June, but we’re midway through June and haven’t seen anything yet.
Mr. Moor: Our plan is now with the Treasury Board, and the Treasury Board is required to table the plans before the end of the period in Parliament. Hopefully, it will be published soon. However, it is the plan that is based on the Main Estimates; it’s not the plan based on the supplementary estimates. That’s something we have developed quite recently, and we will, of course, be building that into the departmental results next year but also into our plan for the following year.
Senator Marshall: In previous years, when a financial person has testified before the Finance Committee, for the amount of funding that’s been requested for capital projects, we’ve been provided with the list that adds up very nicely to the total amount that’s requested. Could we also get a copy of that for our records for this year?
Mr. Moor: I would be very pleased to provide you with a list, but maybe I will take a bit of time to talk about some of the new things that are going into the plan.
If you’re looking at the supplementary estimates, the most significant increase is in the Joint Support Ship. That work is already under way, but there was a budget gap which has now been filled.
In terms of the Main Estimates, the most significant changes are around the CMMA, the Canadian Multi-Mission Aircraft. That is now fully under way. Those are the biggest numbers in terms of the mains and the supplementary estimates.
Senator Marshall: That’s very helpful.
The increase in the pay for personnel, or maybe it’s for new recruitment — is there a breakdown of that $2.1 billion?
Mr. Moor: There is no breakdown at the moment. Maybe I could pass that to the Lieutenant-General who will give you more detail.
Lieutenant-General Stephen R. Kelsey, Vice Chief of the Defence Staff, Department of National Defence: Thank you.
Chair, this is really an important question for us. We were very excited to see that money in the allocation. Our challenge is to make sure we incentivize the right retention and the right attraction elements. We have practice with certain trades, such as pilots. We want to extend that to the ones who are high-value, hard to grow and hard to retain.
The specific question is, what is the breakdown of the money? That’s precisely what we’re working through with our colleagues at Treasury Board. We want to make sure we get it right, but we’re thrilled to have the opportunity to finally make a difference for those young soldiers, sailors and aviators who are struggling to serve their country while also looking after their families.
[Translation]
The Chair: Thank you very much.
Senator Forest: Thank you for joining us today. Procurement is a major issue. Last year, the Parliamentary Budget Officer estimated that, between 2017-18 and 2022-23, there was a $12 billion shortfall between planned capital spending and actual capital spending. I understand the government is focusing on changing the procurement system to make it more efficient. However, in concrete terms, based on the plan you tabled with Treasury Board, how will we improve procurement from the development of specifications to the delivery of the desired capital asset?
Nancy Tremblay, Assistant Deputy Minister, Materiel, Department of National Defence: Thank you very much for the question. Indeed, we have to deliver on a number of projects; it is an impressive list and there are major challenges. We have project teams managing each of these projects and closely collaborating with industry to understand those challenges. When we have to make major changes to various projects relating to equipment or we need to ensure integration with other systems currently used by the Canadian Armed Forces, obviously, that complicates equipment delivery.
However, by monitoring the processes very closely and working with industry, with our colleagues at Industry Canada and Public Services and Procurement Canada, we can ensure that industry follows the contracts we have.
Senator Forest: We saw that in the past with the maritime procurement policy: There can be political interference. It’s not really part of your mandate, but it’s a major challenge to draft technical specifications that will allow us to obtain a product within the desired budget. Do you intend to make any changes to the technical specifications phase?
There were basic specifications, but they changed significantly during and before the request for proposals. Ultimately, we’re in a situation where the cost of the good can vary widely.
Ms. Tremblay: Thank you for the question. Indeed, specifications for equipment we need built are critically important. Typically, when we call for tenders, the relevant industry can submit a draft proposal, but everything needs to be subsequently refined to meet the needs of the Canadian Armed Forces. Refining the specifications requires choices to be made, such as the different equipment that will be included. Consequently, these are complex issues, and decisions need to be made wisely, based on costs and timelines, to ensure we can deliver the goods.
Senator Forest: The Prime Minister clearly indicated that he wanted, with this big bill which represents a huge challenge, to consolidate the Canadian economy. Innovation is a major element. We’ve seen that we have, especially in Quebec, world‑class centres of excellence in aeronautics. In your strategies, have you put in place the means to maximize the regional spinoffs of those contracts, to consolidate our centres of excellence? Consider the fact that we awarded the contract for our reconnaissance planes, without any request for proposals, to a company like Bombardier. Is there an attempt to maximize the benefits for those centres of excellence, be it aeronautics, shipbuilding or even military equipment?
Ms. Tremblay: Absolutely. The desire to ensure economic benefits for Canada is undoubtedly at the heart of our discussions about any procurement project. We also understand that, more now than ever before, we need to diversify our supply chain when it comes to where our military equipment comes from. All those factors are taken into consideration, but ultimately, we recognize that the economic benefits to Canada contribute to our country’s sovereignty and economic security.
Senator Gignac: Welcome to our witnesses and thank you for your public and military service. Many of us were delighted to hear Prime Minister Carney’s recent announcement, given we haven’t invested sufficiently in military defence and above all in military salaries. I’d like to talk about procurement, along the lines my colleague did.
Does the United States operate like Canada? Yesterday, the committee heard from Public Services and Procurement Canada representatives, and the military side is quite technical. Furthermore, Canada is a member of NORAD. I understand there are discussions to have your department be responsible for procurement decisions. Would that simplify and accelerate the process, which is rather long? I think the geopolitical context won’t give us that much time to make these purchases.
Ms. Tremblay: Indeed, our first job is to consider the needs of the Canadian Armed Forces. What equipment do they need to do what we’re asking them to do? In the current procurement system, we go through Public Services and Procurement Canada for all that. Yes, operational needs are important and must be met, but we also need to ensure that we get equipment at the best possible price and that there are economic benefits for Canada.
Discussions are now under way, under our current system, since the government said there would be a dedicated agency exclusively for defence procurement. As a result, we have begun discussions with Public Services and Procurement Canada. No final decision has been made yet as to the scope of the work of that agency or where it will be located.
Senator Gignac: Does it work that way in the United States? Is there a dedicated procurement agency?
Ms. Tremblay: Yes, in the United States, it’s —
Senator Gignac: We’re a member of NORAD, and when the Standing Committee on National Defence went to Colorado Springs, we asked Mr. Pelletier that question. I know it works differently in the United States.
Ms. Tremblay: In the United States, it works differently, but obviously we are in contact with our American colleagues concerning potential projects where trade could be conducted with the United States. Of course, consideration of NORAD-related operations is often at the heart of our discussions.
Senator Gignac: Earlier in June, I was a little surprised to see that an additional $9 billion in spending would bring us to the 2% of GDP target, as requested by NATO. When I looked into it a little more, I understood that, to reach $62 billion, they included $14 billion in defence-related spending by other departments, such as Global Affairs Canada, the Canadian Coast Guard and Veterans Affairs Canada. That is how NATO’s 2% target is reached.
This supposedly brings us to NATO’s 2% target. However, NATO still has an audit committee responsible for verifying that countries are not playing with the numbers and that the spending is indeed related to defence. Have you checked to ensure that all this additional spending is indeed defence-related in other departments and will be eligible toward the 2% target, as calculated by an audit committee that publishes the results every year, country by country?
Mr. Moor: Thank you very much for your question. To give you more details, I will answer in English.
[English]
Yes, absolutely. GDP for this year is estimated by NATO and is coming in at just over $3.1 trillion, so 2% of that number is $62.7 billion.
Senator Gignac: My question is not about that. The economists are able to do that. With your spending in the other departments that you tag as defence spending, is it allowed under the audit committee of NATO, or we don’t know yet and will know only in a year from now if we’ll reach 2% this year?
Mr. Moor: About twenty years ago, NATO put out a definition of defence expenditures. We receive, twice a year, the returns from all other government departments based on that definition. This year, it is about $14.6 billion that is included for other government departments. All of those are attested to by their CFOs that they are in line with the guidance. NATO has never done any audit work associated with individual states’ declarations of their numbers.
[Translation]
Senator Moreau: Thank you for joining us. One of the Senate’s roles is to give a voice to those who do not have the opportunity to speak. I must admit that I have been very concerned since speaking with a member of the Royal Canadian Navy during a flight. This person described the condition of the ship on which they work and told me that, in some respects, the crew members fear for their own safety.
How would you assess the condition of our ships in the navy? What portion of the budget do you allocate to the maintenance and improvement of that equipment? With regard to the additional funds allocated to you — nearly $9 billion — are you setting aside any of these funds to improve safety on board Royal Canadian Navy vessels?
Ms. Tremblay: Thank you for the question, senator. It is a very timely question, given the current age of some of our ships in the navy.
Significant investments are being made to keep our current equipment in service. We know that our ageing fleets require much more maintenance than in the past, and ongoing maintenance is being carried out on our fleets. There is much more work being done now than in the past, given the condition of our ships. I must say that we absolutely don’t want to jeopardize the safety of Canadian Armed Forces members, including sailors. However, it has been determined that the ships operated by sailors are safe enough to be used —
Senator Moreau: By whom?
Ms. Tremblay: The group responsible for equipment has a division that deals specifically with the equipment quality assurance program. These are technical experts, engineers and technicians who ensure that the work done on these ships will make it possible to operate them safely.
Senator Moreau: Why did this person, who was not very vocal, tell me sincerely that the crew members of the ship on which she worked sometimes feared for their own safety? You can be an expert in an office, but when you go out on the dock, you realize that the situation can be very different from what you estimate based on statistical or theoretical data.
Is there a connection between the members of the armed forces, the people on board the ships who feel afraid, and the experts you mention, and if so, what form does it take? Can you tell me, since you say that there is an increase in the costs of maintaining the vessels due to their age, what proportion of the increase in costs has occurred over the last five years?
Ms. Tremblay: I cannot comment on the incident reported to you on your flight, but I can assure you that we are working very closely with the Royal Canadian Navy to ensure that operators and sailors can report any concerns they may have about the condition of equipment. Nothing is taken lightly. If we need to deploy additional forces to help with certain tasks, we will do so, but large-scale work is usually carried out during scheduled maintenance periods. We are talking about a long time frame, as the work requires more detail.
I don’t have the exact figures on the cost increase over the past five years, but I can confirm that costs have increased. I can provide more information if needed.
Senator Moreau: Could you send it to the committee clerk?
Ms. Tremblay: Absolutely.
[English]
Senator Pate: Thank you very much to all of you for being here.
I notice one of the things that has been reported is that there are recruitment and retention challenges, and there is some suggestion you need more resources to address some of this. For instance, it has been reported that of the 70,880 applications received by the Canadian Armed Forces in 2023 and 2024, only 4,301 candidates were enrolled.
I don’t know if you have the demographics available, but I’d be interested in what the demographics are, and, in particular, whether you have made any links to some of the concerns that have been raised around lack of progress on the 48 recommendations made by Louise Arbour, following her report.
As well, although the external monitor’s Fourth Status Report found that there had been progress reported on all of the recommendations, there seems to be a differing perspective, certainly in the media, about people still coming forward and feeling that the issues of sexual harassment within the military are not being taken seriously.
I’m curious about who is doing the assessments now and whether you’re following the recommendations. How do you link that to retention? What are the demographics, and what are the plans moving forward to continue to try to remedy the long‑standing issue of sexual harassment in the military?
LGen. Kelsey: Chair, I’ll begin with the external review and then link it to what it means for recruiting interaction.
Foremost, and as was alluded to previously, chair, related to the life and circumstance of our individuals, people are at the core, and our ability to hold on to the talent we have and attract is absolutely to do with our accountability around the four external reviews and the 206 recommendations, for which we continue to monitor implementation. We’re in the third phase, and we’ve had 149 of those recommendations, Madam Arbour just being one of the external reviews, moving forward with serious change that is needed. That is an activity that is the centre of the Chief of the Defence Staff’s mandate that she has given all of us, and it centres around the purpose and dignity of every individual and the accountability for those that are not living up to our expectations. So there has been a significant transformation. Why it’s so important: it’s the right thing to do, it’s living to the values that Canadians expect of us, but it is our ability to get folks in the door.
Chair, I don’t recognize the numbers that were used, but I think, on the face of it, they’re correct for the volume. We still don’t have a challenge attracting people in the tens of thousands, but what has been a challenge in the past has been how we get people through the door. There has been a transformation of the recruiting and intake process from the technology, changing the analogue approach and the sequence. I’m happy to report that we attained our intake plan — we actually exceeded it — of 7,155 folks this past year, and our retention last year was actually higher than we expected. Your Canadian Forces grew by 2,000 folks. We’re still a long way from achieving the regular force benchmark of 71,500, but it’s forward motion, and it’s freezing one year, admittedly, as a recognition of the significant change that’s happened.
I’m happy to expand more on what those changes are, but connecting the need for accountability against the values we expound and what it means for retention, the two things came together in a way that we envisioned this past year.
Senator Pate: The demographics, are you able to provide how many women, how many —
LGen. Kelsey: We absolutely have that available. I’m going to check the binder, chair, to see if I have it with me. We do monitor it very closely — women, Indigenous, all representative groups.
Senator Pate: If you can provide that in writing, I would be interested in the retention as well as new recruits, what the demographics are.
LGen. Kelsey: I’ll see if I have it here.
In terms of the retention, amongst our Five Eyes, because we do collaborate with our closest allies, Canada actually has the greatest success in retention, although we’re still not satisfied. We recognize how much we put into investing into the talent we have, and we will want to keep them for as long as they continue to serve.
We expected an attrition of 4,876, and the number of folks that we retained — sorry, we projected 5,389 retirements, but the actual number of retirements was 4,800. Public math is never good, chair, but that is about 500 folks we kept that we expected to retire.
[Translation]
The Chair: We have the funding in front of us.
LGen. Kelsey: Pardon me.
[English]
Senator Galvez: Thank you so much for being here and for the work you do. I have a specific question and then two more general questions.
Our analysts prepared some notes for us, and I was reading that the budget estimated for the CF-18 fighters went to an increase of over 50%. My question for this point is, when do you stop? When does this stop? Is it final, this 50% plus budget, or if there is another problem, can it be increased to 70, 100, 200? Where is the limit?
Mr. Moor: Maybe I’ll have a go at answering this.
I think you may be referring to the F-35 fighters, which is what the Auditor General has just done their report on. The CF-18s are our existing fighter aircraft which we are maintaining, and I’m sure Nancy can answer questions around the maintenance costs associated with the CF-18s. The F-35s will come into service in the early 2030s to replace the CF-18s.
The F-35 program has just recently increased its costs by about $8.5 billion, which was referred to in the Auditor General’s report. However, half of that money is contingency. We have set aside a contingency for the budget, so it’s not actually a cost increase. It is an anticipation of the risk of a cost increase as a result of foreign exchange or inflation and other things over the course of the project.
Senator Galvez: Thank you so much.
I was invited by the Royal Canadian Navy to visit the Arctic, and we extended the visit to Nuuk in Greenland and Reykjavik.. At that time, my focus was to see the struggles of climate change and the erosion of the coast, but also the Arctic security with respect to Indigenous people, Inuit in particular over there. I know that with the extreme weather events, we are calling you more and more and more to come and help with these situations. The funds that you are receiving, do they include some of these activities, and what do you think about having Defence being called to these events? Is that your job?
Mr. Moor: We do have a funding envelope for Operation LENTUS, which is around responding to domestic events. We have a relatively limited budget in there because we respond as and when needed. Maybe the general can provide more details around how it operates, in particular with the recent fires.
LGen. Kelsey: The Canadian Armed Forces is conventionally viewed as a force of last resort, but when Canadians need us, we’re there without hesitation. I think the recent events in northern Manitoba demonstrate once again there are really talented young Canadians serving in the Canadian Forces ready to jump in and help communities in need.
Because our system has been so efficient over the past few decades, what’s actually happening is we’re consuming readiness. Those forces that would have otherwise been used for training and preparation for availability for other missions are, very happily, helping Canadians, but it’s because our machine has been very efficient. We’ve managed the level of readiness across the force, and this includes the availability of ships, why some are at higher readiness and higher materiel assurance.
This investment will actually allow more of the force to be at a higher readiness so that when we do these responses to Canadians, it’s less of an impact to the deterrence availability of the force that we’re trying to achieve. This investment will allow us to do that with minimal or with reduced impact readiness.
Senator Galvez: Can you tell me how many of the forces are dedicated to this activity, a percentage?
LGen. Kelsey: Chair, I can’t give the percentage, but what I can assure is that across Canada there is always an emergency response unit that is multifaceted and able to respond to any nature of needs, including international response. That’s generally a unit or a company of 150 or so folks, and we have it postured across Canada. It is not specifically for fires or floods.
Equally so, for the aircraft availability, because of their posture across Canada, they are normally assigned to other tasks. Search and rescue is a good example. When needed, they will be reprioritized, pulled from training or pulled out of whatever location they are. The fires in Manitoba saw helicopters and aircraft come from Halifax, Shearwater, Quebec, Trenton, Winnipeg, Edmonton and Yellowknife, all surging within 48 hours into Norway House and another community in need.
Senator Galvez: Do you expect more next year or less?
LGen. Kelsey: The pattern over the last decade, chair, is that the Canadian Forces has been called upon to perform these emergency responses. It’s not reducing, and this is a direct — there is a correlation to climate change and availability of provincial jurisdictions and resources, given the concurrency of the number of fires or the volume of the floods.
Senator Galvez: Thank you.
Senator Loffreda: Thank you for being here, and thank you for your service.
My question is for Lieutenant-General Kelsey. I’m glad to have heard your previous comments on recruitment, retention and your values, which are all extremely important to the well‑being of our Armed Forces. The Auditor General of Canada was with us during the first panel this morning. You may have heard her mention that she would be interested in conducting a future audit on the culture at the Department of National Defence. We know this is a priority for the defence team. There are many references to our commitment to changing and improving the culture at DND in your departmental plan. I note your commitment to addressing misconduct, adopting an inclusive culture and providing a psychologically safe environment for current and future team members, so kudos on that. However, what concerns me is that some of your performance indicators related to the culture are either new or have yet to even determine the targets. As a result, we don’t have much data, which could be a problem if ever the Auditor General performs an audit.
I wonder if you would comment on this. Would DND welcome a special audit on the culture by the Auditor General? Would this add value or help you in the future in retention or recruitment and in general for the well-being of our Armed Forces?
LGen. Kelsey: Thank you, chair.
Any opportunity the Canadian Armed Forces and the department has to demonstrate the change that occurred is always welcome. As mentioned, we have had four external audits and quite a bit of work to do. Although we’re in the third phase — and I’ll explain why we had to sequence these — there has been substantive change.
I did mention the total is about 206 different initiatives. Some of them, 51, are legislative changes that need to occur, and 15 are regulatory. Then a big number, 128 or 129 are internal policies.
When it comes to the legislative change, for example, the previous undertaking that needs to be restarted around changes to the National Defence Act were significant uplifts. We would ordinarily want to undertake each of these changes in the right sequence, but because of the load and the nature, we’ve accelerated a few, but more often than not we’ve had to get the right order. For that reason, we’ve been very deliberate, frustrating as it is for our members, to take the right time over four successive phases to get the work done.
But as I mentioned previously, we’re actually quite proud of the change. We’re seeing it in our members, and we feel there is greater accountability for past conduct. There are 149 of those 206 that have been either substantially implemented or are fully complete, but we have much work to do still.
Senator Loffreda: Okay, thank you.
Supplementary question: The Auditor General in her report outlined the various departments involved in the acquisition of Canada’s fighter jets. She explained the distinct roles and responsibility of National Defence, Public Services and Procurement Canada and Defence Construction Canada. I wouldn’t be surprised if additional departments or agencies are also playing a supporting role in the process.
While I do understand that each organization has a defined mandate, I’m concerned that there may be too many players involved. I know in the corporate world, we would always try to flatten the organization. The flatter it is, the closer you are to the client and the people you should serve, with too many players creating overlap in efficiencies or blurred lines of accountability. Could you speak to the working relationship between these three core organizations? In your view, are there areas where consolidating responsibilities or streamlining coordination could lead to improved efficiencies or better outcomes?
Mr. Moor: We have a very good relationship with the other government departments. These projects are complex projects. In the case of the F-35, it’s actually an international partnership agreement across eight different countries where we are acquiring these jets. This means that all of the jets are the same price whoever is buying them, and the Americans control that organization and they drive the price down because they are the biggest purchaser of the F-35 jets. As Nancy said previously, the government is suggesting creating a defence procurement agency, and that is under way at the moment.
Maybe Nancy can tell you a bit more about the relationship between the procurement sides.
Ms. Tremblay: Thank you very much.
Mr. Chair, I can attest that the relationships with the other government departments are very good, and they have to be. If we want to be able as a country to move ahead with that major, complex procurements, we need to work together.
Obviously, it creates a lot of interesting discussions, and sometimes tensions but I would like to call them healthy tensions. because there are many interests at play, as I said before: the Canadian Armed Forces operational requirements, the economic benefits, making sure that we’re getting value for money. All of those considerations are at the forefront of what we’re pushing as a complex project.
In the case of the F-35, we’re going to take delivery of the first ones next year, 2026, which will be delivered in the U.S. for the training of our pilots. Then in 2028 we’re going to be taking delivery of the first ones that will be delivered to Canada. It’s a complex program, but it is demonstrating good progress so far.
Senator Loffreda: Thank you.
[Translation]
Senator Dalphond: I am looking at the figures in the Supplementary Estimates (A). Almost $45 billion is earmarked for the National Defence budget. However, the target has not yet been met. Does that suggest that there will be a Supplementary Expenditure Budget (B) or (C) providing for an additional $12 billion? If not, will part of this budget come from departments responsible for the Coast Guard, surveillance or other departments?
Mr. Moor: Thank you very much for your question.
[English]
The way it operates is we can count all the defence expenditures across the Government of Canada which are identified within the definition of NATO. It is true to say that we have $45 billion out of the $62.7 billion in total, but the difference is made up by the other government departments including their numbers in. Veterans Affairs is the biggest contributor there for obvious reasons, with payments to veterans, but the Coast Guard is also in there in terms of construction of their ships. We also have the Communications Security Establishment in there as well.
We looked across all of the different departments. They submit their proposals, and those proposals are attested to by the CFO. On that basis, we do not have a gap to 2% this year. The challenge will be, of course, that it is a lot of money. We have to spend the money, but I am also pleased to say that Supplementary Estimates (B) and (C) will be an opportunity to receive further funding. There are Treasury Board submissions going through the process now, and we will access that in Supplementary Estimates (B) or Supplementary Estimates (C) in the future.
Senator Dalphond: According to what you said, you think we have reached the target of $62 billion so far if we adopt the other departments that are also having a link with veterans or the national security issues?
Mr. Moor: At the moment, we are at 2.01%. Clearly, that is our estimate of what we will spend this financial year, but new things will potentially come in. It will also be a challenge to spend this money. It is a lot of money, and we need to make sure we spend it wisely and deliver best value for money for the taxpayer.
Senator Dalphond: We trust that things will improve. According to the Auditor General, there are some improvements to be made.
My next set of questions is for you, Lieutenant-General. I read in the National Post and the Ottawa Citizen articles by David Pugliese who specializes in military issues. He wrote very recently, I think it was last week, as follows:
In April 2024, a top adviser to the Chief of Defence staff warned that Canadian soldiers were leaving the ranks because of the toxic military leadership. . . .
Job dissatisfaction, a lack of housing and repeated moves to new locations across the country have been cited in past military reports as the top reasons that Canadian Forces personnel leave.
Can you indicate to me what has been done to improve job dissatisfaction or to reduce the level of job dissatisfaction, especially in terms of military leadership? What is being done about the lack of proper housing?
LGen. Kelsey: I am familiar with the article you referred to. The evidence shows that we’re retaining folks, which is counter to the argument that’s made.
Where I will agree is we are losing good talent because the jobs they envision joining — to sail and fly — are fewer than expected because of the system we’ve been in for the last three decades, where we have an efficient way of delivering effects by choice and, as I alluded to, we manage readiness. Not every ship, aircraft or unit is at the same level. This investment will allow us to raise the total readiness of your Canadian Forces we have today and, in so doing, allow individuals to fulfill their own expectations for the lifestyle and what they committed to do serving their country.
Speaking to leadership, it’s a continuation of the previous question about accountability, where maybe we were not living up to Canadian values in the past.
We have talented young Canadians joining. They use tools and digital technology differently. They learn differently. They might be smarter than our generation. It means we need to motivate them differently, treat them with the dignity they deserve and exploit their talents in a way we never tapped previously.
Housing is certainly an issue. Our ability to retain good Canadians is not only the job and tools this money will allow, it’s also looking after their families. The investment that has been made will allow us to continue that in terms of programs. A previous policy announcement on staff started in motion the growth of military housing and quarters. We have an ambition for more. We look forward to subsequent announcements that will give further investment to military housing. It’s all connected.
Senator MacAdam: Regarding the Auditor General’s report Delivering Canada’s Future Fighter Jet Capability, the Auditor General mentions that in 2018, when she last audited Canada’s fighter force, she flagged that one of National Defence’s biggest obstacles was a shortage of qualified pilots. The department at the time agreed with the recommendation. Six years later, we have another report saying this personnel issue is still something that needs to be addressed. Can you comment on that? Are there any reasons why the issue, when it was flagged before, wasn’t fully addressed?
Mr. Moor: I can start with the projects we have under way.
We already had two projects approved. The Future Aircrew Training (FAcT) Program is developing greater capacity to train our pilots, and that leads into the Future Fighter Lead-in Training (FFLIT) program which is also developing training resources to be prepared for the F-35s when they arrive. We have two projects under way at the moment, invested significant funding and are developing a Canadian approach to doing the fighter training.
I’ll hand it over to the general now to talk more about the actual numbers.
LGen. Kelsey: The short answer, chair, is that we didn’t have the resources to incentivize retention of these pilots we wanted. It’s not just pilots, although pilots are at the top tier of the competencies and experience. They require heavy investment to get to the level to perform, even on the jets we have today.
One of the abilities this investment will allow is a suite of retention initiatives to include extending the program we have for pilots. They’re such a skilled and precise workforce. What motivates them is the right equipment as much as the dollar incentive. We haven’t done what we need to do to retain the pilots.
This committee will be aware that the Air Force is transforming almost all of its fleets. There is exciting news with new platforms. With the F-35 arriving soon, the first two in the United States next year, that in itself is an attraction for keeping these very talented Canadians to do what we’re going to ask them to do.
We have work to do to get these young folks in the door and staying with us and not working for others who would like to poach the benefit of our investment and use them for other purposes.
Senator Kingston: I’m going to switch gears and talk about the $2.1 billion for recruitment, retention and support programs for the Armed Forces. In your opening remarks, Mr. Moor, you talked about health services. I want you to expand on what you mean by that and how much of that $2.1 billion you’re thinking of for those services and what they actually are.
Mr. Moor: The Canadian Armed Forces are the fourteenth health service provider in the country. We have a considerable number of people to actually provide those health and dental services for our serving members. We’re proud of doing that.
Like other health priorities, we have struggled recruiting people and having sufficient people in place. The money we’ve been allocated most recently was to pay for additional external support through health care providers who can provide for services when we do not have sufficient people in house to do it.
The general can provide more detail on how we operate our health care services, but we are now fully funded to deal with the health care requirements at the moment. Clearly, they’re always changing and the cost of health care is always increasing.
LGen. Kelsey: An important link has been made to retaining the talent we want. We have to look after them, both the individuals and their families.
Although this investment is about the military folks, it is a recognition that, in order to employ them to best ability, we move them quite regularly. While we’re looking at the frequency and necessity of that move, the reality is that, when we do that, we need to think through all of the systems of support. In this case, the investment in the medical is, as the CFO has said, to pay the bills for a health care system that really is the fourteenth province.
Our ambition doesn’t stop there. We would like to do more to look after our folks’ physical health, mental health and all the services we have through our Canadian Forces Morale and Welfare Services (CFMWS) and a number of programs for the families we would like to see grow. We’re in examination of what the needs are. That may differ whether you’re in Halifax, Trenton, Quebec City or Winnipeg.
We have been thoughtful about where we spend that one dollar we get and, if we want to spend another dollar, where it comes from. With this remarkable opportunity, although it offers a challenge to spend in the way we envision, there are so many good things we can do for the individuals who choose to serve their country, and the defence team partners that help us on our way.
Senator Kingston: I have an interest in CFB Gagetown. It’s very close to where my home is. I see great opportunities there in a number of ways, and one is how nurses and nurse practitioners could improve your primary care. There is a faculty of nursing almost on the doorstep of CFB Gagetown. I’d like you to think about that and what there might be there.
In terms of housing, CFB Gagetown is close to many villages and towns. I know from living in New Brunswick for a long time that people in the Forces often like to buy something when they get there. That’s often possible. I don’t understand completely how that fits in with the housing piece you were speaking about recently in terms of how do you help people to make that happen, both buying and selling, when they have to be moved for operational purposes.
LGen. Kelsey: Chair, for the buying and selling, we already have mechanisms, just like the public service and the RCMP, to support or compensate for legal fees, et cetera. But we can always do better, and every region is slightly different.
One of the challenges for housing of our personnel, whether they’re single or families, has always been matching the economic environment. It wasn’t that long ago where the condition index of all of our housing inventory was such that it didn’t make sense to retain. Folks could afford to live in town. That has obviously changed recently, and that’s why the investment certainly in the previous policy, Our North, Strong and Free, is allowing us to actually look at where the needs are based on the completely different economic circumstances.
We are also undertaking a pathfinder initiative, which is to look at the federal real property that we have to not only look after our military folks for housing but to see what can be done for communities. The pathfinder initiative is taking place in Halifax, Victoria and Toronto, I think — all three different economic realities. But it’s all through the lens of these individuals, these young families in particular, that are struggling to serve their country, look after their families and live somewhere.
Just a comment on the final one about nursing: We have an aspiration, chair, to grow the number of doctors and nurse practitioners. We use them for a very specific purpose, of course, when we’re on operations, and it’s always a balance with local hospitals to keep them qualified, doing things, looking after folks more than ankle and knee injuries and colds. The partnership with local cities and schools is a cornerstone of our approach. We just haven’t had the resources to undertake that the way we used to. So we welcome this investment.
Senator Kingston: I would like to talk to you or whoever you would say would be a good person to talk to about some of the opportunities that might be there. That would be great.
Just as a final plug, mental health is really an important piece. I know in CFB Gagetown and the surrounding villages and towns that are close to it that there are opportunities to have new treatment for PTSD and those kinds of things. We do have veterans who decide to stay in our lovely part of the world when they retire or when they are finished their tour of duty. Thank you.
[Translation]
The Chair: Obviously, you will have to spend tens of billions of dollars. I imagine you will also analyze the data, make decisions and follow recommendations based on the local economic impact.
In the plan you will develop to spend or invest these funds, particularly in infrastructure…. I have a few criteria in mind; I will list them and ask you if they align with yours, or if they are among those you wish to consider.
First are the economic benefits within the country.
Second are the civilian technological benefits. Obviously, the money can be invested in military equipment, but this can subsequently have civilian consequences, whether for public safety, for example, or for the police force.
Third is the maintenance of response capability in peacetime. Obviously, if the money hasn’t been spent and industries have closed down, but we want to maintain our social fabric and our industrial supply chain, there is a shortfall. So, a certain amount is not invested, activities stop, factories close, or they are not transformed and they die out.
Last is the importance of increasing the operational independence of defence and of not depending on a third country to maintain this sovereignty.
These are my notes.
What do you have in your fact sheets to ensure that there are maximum benefits of this nature or similar for Canada?
[English]
Mr. Moor: Maybe I’ll start, and I’ll probably hand over to Nancy to talk a bit.
Our priorities are closely aligned with your priorities, and I am pleased to say that in Supplementary Estimates (A) we estimate about 70% of the money we will be receiving will be spent in Canada, both through our Armed Forces but also through procurement. It includes $2 billion on the Defence Industrial Strategy, which is specifically designed to build the capability and capacity of our Canadian suppliers over the longer term period. We received some funding around the defence domestic production of shells which will start building additional infrastructure for those companies which are based in Canada.
I’ll hand over now to Nancy Tremblay who will take you a bit more around how we’re procuring to try and maximize the benefits for Canada.
[Translation]
Ms. Tremblay: As I said earlier, the economic benefits for the country are at the heart of our discussions on all procurement projects we undertake with our colleagues at Industry Canada and Public Services and Procurement Canada.
Obviously, when we have manufacturing capabilities in Canada, that’s the first place we look. If those capabilities are lacking, under the Industrial and Technological Benefits Policy, companies are asked to invest an amount equal to the value of the contract they are awarded, which brings economic benefits.
You mentioned the importance of maintaining a response capability in peacetime. I completely agree with you. I believe that the defence investments we are making today and will make in the future will enable us to do this more often than we have been able to in the past.
We all understand that in order to have a strong industry in Canada, we need to ensure that there is consistent demand for industry so that it can maintain the necessary capability and serve the Canadian Armed Forces.
I think the priorities you mentioned are very similar to ours.
The Chair: With regard to the transformation of the Canadian Coast Guard, I imagine that its operational capabilities will have to be modified to align with a more military dimension, so that it can be included in the calculation of the 2%, 3.5% or 5% of GDP that will be determined or that Canada will decide to commit to in relation to NATO.
Do you have an idea of the type of transformation, the cost, the time frame?
What obstacles do you foresee in achieving this goal? Is there resistance to change or people who want to protect their turf on this type of mandate?
[English]
Mr. Moor: Maybe I can start and then hand over to the general.
There is a bill going through Parliament now around changing the mandate of the Coast Guard which would allow Defence to add additional equipment — detecting equipment — for intelligence gathering. That is going through Parliament.
Currently, about 60% of the Coast Guard is included in the definition of defence expenditures under NATO. I think there is potentially an opportunity, as the Coast Guard moves across to Defence, of having a look at that percentage to see whether further percentage could be added.
I’ll hand over to the general who can talk about how we will integrate the Coast Guard into our operations.
[Translation]
LGen. Kelsey: We have been working closely with the Canadian Coast Guard for a number of years. Our recent collaboration involves surveillance around the Far North. There may be a gap for us, since we have focused our efforts on our vessels and equipment.
So there will be good collaboration to check what is happening in the Far North.
That is the only intent when it comes to the Canadian Coast Guard, along with equipment and capabilities to communicate and exchange data and perspectives. There is no intent to integrate the Coast Guard into the Canadian Armed Forces. It is an agency that reports to our minister and with which we have established effective collaboration, but its mission is completely different from that of the Canadian Armed Forces.
I have read and heard some things in the media about plans to arm the Coast Guard, but that is not the case; it is simply a matter of increasing its capabilities and positioning in the Far North to our advantage.
As the Chief Financial Officer said, for a number of years now, a percentage of the Coast Guard’s contribution has counted toward NATO targets. The difference in contribution between the Coast Guard and National Defence is significant, but it is only a fraction of the actual percentage.
[English]
Senator Marshall: How are you going to guard against the lapsing of funds, which has historically been a problem? I think you were saying, Mr. Moor, that based on the funding that’s been requested, you’re hoping to meet 2.01%, but if you lapse significant amounts of money — I know you’re trying to be dead on, but based on the history of the department, how are you going to guard against lapsing of funding?
Mr. Moor: What I would say is it is always going to be a challenge, especially when you’re dealing with numbers this large. What I am pleased to say is we have significantly improved our performance over the last three years. After COVID, we did lapse significant amounts of money. In 2022-23, we lapsed about 5.4% of our budget. However, this last year, 2024-25, we only lapsed 2%, so we are showing that we are more focused on delivering what we need to deliver.
The second area, I would say, is around capital. Capital is more difficult because often you’re dependent on the suppliers and their capacity to actually deliver. A good example of that is Boeing went on strike last year, and that significantly pushed back some of their deadlines in terms of delivery. However, we have a Capital Investment Fund, and that allows us to move money on an annual basis so that we can balance our books, ensure it’s best value for money and we don’t lapse overall.
I would say the Auditor General is clearly focused on this, the Parliamentary Budget Officer is as well, and so are we. I’m pleased to say that the 2% was well below the government’s target of 5%. We’re not allowed to lapse more than 5%. Last year, we only lapsed 2%.
Senator Pate: I’m curious, based on the question that Senator Kingston asked, as someone who grew up in private military/married quarters, PMQs, in Germany and throughout Canada, how much spending is now allocated towards assisting people to purchase homes versus the personnel married quarters that used to be the most usual place that many folks would live?
I also wanted to go back to what I was asking earlier and ask a question about what concrete measures are being taken to continue to address achieving the meaningful shift in culture away from misogyny and sexism. I will link to that. For many years, there was a commitment to have sexual assault cases prosecuted by civilian courts, but in January of this year, there was a report in the Ottawa Citizen about the sexual assault of Kristen Adams in Latvia in 2022. It was interesting that even though the recommendation was that sexual assault cases, including overseas, be tried in civilian courts, hers was not. I’m curious what is happening with all of those kinds of measures.
LGen. Kelsey: Beginning with the housing question, to my understanding, Defence doesn’t loan any money to our members for first-time home buying. Those programs are available, but it’s nothing that we provide. What we do try to do is understand the circumstances of our military families and prioritize their access to the military housing that we do have. From your experience, you would know that the rate we set is commensurate with the locale — there is a calculus such that we’re not competing with local rental opportunities, nor are we providing advantage and, therefore, a benefit unintentionally.
In terms of the concrete action and what is different and what is it that can give assurance that we’re actually following through on all of these changes across the four reports, I can only assure that our Chief of the Defence Staff is committed. It is a discussion at every one of our senior councils. I’m referring to a placemat from an event last week where all of the leaders of the department, specifically the Canadian Forces, got together to regularly check on progress. It is the Comprehensive Implementation Plan, the CIP, that we refer to. We have a brigadier-general whose full-time job is to track every single initiative and hold leaders to account for the progress on each. Each of us knows which initiatives fall to our responsibility, and it’s not something that’s delegated. It’s me personally following through on it.
The reason I was able to answer on the progress was simply because it just occurred last week where we go through each one. We have the External Monitor, Jocelyne Therrien, who is still with us. In fact, I’m meeting with her tomorrow afternoon. She regularly meets with every single leader across the force to get insights or, in many cases, she points us to where progress is not occurring.
We feel it’s different, but it’s through the eyes of the young folks. My own son just signed up to the Canadian Forces and had expectations that are very different, having now been part of it, realizing that this is a different Canadian Forces than maybe he expected or saw on television.
Senator Loffreda: Going back to last week’s Auditor General report with yet another reminder that Canada continues to face serious challenges in successfully procuring military equipment, something that has been a long-standing issue, she found that National Defence had not fully developed its plans to coordinate and manage the Future Fighter Capability Project beyond the specific issues of delivering the 88 fighter jets on time and on budget. I’m concerned that the department may not have a firm grasp on the overall strategic picture. The report highlights several troubling issues, such as robust contingency planning, shortage of departmental engineering personnel and an ongoing shortage of qualified pilots, a concern first raised in the 2018 audit.
Can you reassure us that these concerns and recommendations are being taken seriously by the department — I’m sure they are — and that the necessary corrective measures will be implemented to ensure the overall success of the Future Fighter Capability Project? I’m sure they’re being taken seriously, but I would like to hear your comments on those findings.
Mr. Moor: We absolutely take very seriously the recommendations. We welcome the audit. It is a very difficult period, and a lot of the reasons for the increased costs are global factors. Defence industry inflation has been very significant over the last five years since COVID. As a result, we’re operating in a difficult environment where there are competing resources and demands across the global supply chain. All of those things were taken into account. One of the reasons the costs went up is because we did build in a greater contingency to try and manage this over the course of the delivery of the project.
Maybe Nancy wants to comment.
Ms. Tremblay: I’m just going to add that we absolutely welcome the findings and recommendations from the Auditor General. We take them very seriously. I want to assure you that oversight and monitoring of major capital projects like this one are done on a constant basis.
It is important to understand that the period that was covered by the audit was right after we received authorization to go ahead. In a project like this one where it’s going to be extended over a number of years, things need to be adapted, and they will change because of factors that are outside of our control, so we need to constantly update our plan to make sure we’re following the risks that could come up throughout those years.
[Translation]
The Chair: Senator Dalphond, you have 15 seconds for your question and 15 seconds for the answer.
Senator Dalphond: This will take more time. You can send me a written response, as this is a $3-billion question. It may take more than 15 seconds.
[English]
What is the difference between funding for defence research and development and support for the Canadian defence industry — $1.425 billion — and contributions for strengthening Canada’s relationship with the defence industry at $1.4 billion? I suspect they are two different types of programs, but could you give us the broad lines or the guidelines for these two programs?
The Chair: Can you provide a written answer?
Mr. Moor: Yes, a written answer.
[Translation]
The Chair: I understand that the other senators have no questions. Can you send your written answers tomorrow, June 18? We need to report back to the House fairly quickly. We understand that some answers will be quicker to find than others, but we won’t be too hard on you. We won’t be tracking your key performance indicators.
Thank you very much. The next meeting will be held tomorrow, June 18, at 11 a.m., to continue our study of the Main Estimates and Supplementary Estimates (A).
Thank you very much to everyone, and thank you again to the witnesses for their clarifications. We felt that your answers were very knowledgeable and accurate. That’s greatly appreciated.
(The committee adjourned.)