Government Operations Committee on June 4th, 2009

[The Chair, Liberal, Derek Lee]

I call the meeting to order.

Colleagues, we're continuing with our review of the economic stimulus package on behalf of Canada's taxpayers. We have a number of departments in front of us today.

I want to apologize for the late start. The environmentalists who were in the room prior to us are using a different time clock from us. We forgive them for that. We'll start now, and I hope the witnesses are ready. We're getting off to a very quick start, but we are ten minutes behind time.

We have a large number of departments with us today. It's a large panel: Western Economic Diversification, the Department of Industry, National Research Council, Atomic Energy of Canada, Department of Human Resources and Skills Development, and Service Canada. That covers a lot of territory.

I'll go to the departments first and invite them to make opening statements. The first on our list, and I'll follow it, is Mr. Watson, associate deputy minister for western economic diversification.

The microphone is yours, sir.

[Daniel Watson, Associate Deputy Minister, Western Economic Diversification]

Good morning, Mr. Chairman. It is a great pleasure to be here today.

Given the fact that you have a very full agenda, I will reduce my opening statement to a minimum.

I understand from our discussions with the committee's clerk that the principal interests today are around vote 35 and two aspects of it that relate to Western Economic Diversification. What I would like to say about that, just to keep my comments to a minimum and allow others to question and make their presentations, is that we had a $994,000 amount related to the Canada Business Network. We have spent $766,000 of it and committed over $300,000 further dollars of it; we cash-manage the rest. So that amount is completely spent or committed at this point in time.

The second amount that we had was related to the RInC program. This was an amount of approximately $20 million that was under vote 35. We are now well beyond the stage of authorities. We have consulted with provinces, territories, and municipalities on a number of occasions, have done outreach sessions, and have had the first deadline for applications. We have worked with the applicants in helping develop those and get them on track. We have a whole bunch in now, and at this point in time we expect to be able to make program announcements in the very short-term future. People have been working through this past weekend and this week to complete due diligence on a great many projects that we would hope to see announced in the very short-term future.

If I can leave my opening remarks with that, I'll return to you, Mr. Chair.

[The Chair, Liberal, Derek Lee]

That's excellent. Thank you; it's just what we were looking for.

Next we'll turn to the Department of Industry and Kevin Lindsey, chief financial officer.

[Kevin Lindsey, Chief Financial Officer, Department of Industry]

Thank you, Mr. Chair, for the opportunity to address the committee. I will be similarly brief.

I'm pleased to be here today to report on Industry Canada's progress on its commitments under the Economic Action Plan, which was passed at the end of March of this year.

After this presentation, I would be pleased to answer your questions. Today, I will speak to you more particularly about the Marquee Tourism Events Program and the Canadian Youth Business Foundation.

I ask committee members to keep in mind that the program is much broader than those two initiatives. In a relatively short period, Industry Canada has announced programs that will support the building of new recreational facilities in communities across the country, increase the availability of broadband services in rural and remote areas, update infrastructure at universities and colleges from coast to coast, and update and modernize federal research facilities.

I would first of all like to talk to you about the $100 million allocated to the Marquee Tourism Events Program over two years. This program's objective is to assist well-established, annual tourist events that have a track record of good programming and excellent management, as well as attracting a high number of tourists.

The program funding will result in more foreign tourists coming to Canada, which will help our tourism industry to overcome the difficulties related to the global economic crisis. Last April and June, the government announced funding for 10 events chosen within the framework of the summer 2009 program. This allocation was intended to provide critical financial assistance quickly to the tourism sector.

Let me now turn briefly to the Canadian Youth Business Foundation. As committee members know, small business is a key economic engine of the Canadian economy, and we're investing a further $10 million in the Canadian Youth Business Foundation.

This $10 million government funding will help many young entrepreneurs discover the challenges and joys of managing their own small business. Under the foundation's loan program, young entrepreneurs can borrow up to $15,000 in start-up funds. In order to be eligible, applicants must be between the ages of 18 and 34, demonstrate that they are committed to starting up or ensuring the growth of their business in Canada and agree to work with a mentor.

Since 1996 the foundation has helped over 3,000 young entrepreneurs create more than 15,500 new jobs. Under the knowledge infrastructure program, Industry Canada has begun to commit funding that will total $2 billion to support new buildings and facilities at universities and colleges. The program responds directly to needs identified by universities and colleges, including affiliated research hospitals, CÉGEPs, publicly funded polytechnical schools, and institutes of technology across Canada.

For its part, the Recreational Infrastructure Canada Program will invest $500 million to help Canadian communities build and upgrade arenas, pools and other recreational facilities.

Within the framework of another initiative intended to offer broadband services to rural and distant communities, we will invest $225 million to ensure that modern communication services are not only available in major centres and cities.

In conclusion, the department remains committed to the timely and targeted delivery of stimulus funds and to all these important programs. These initiatives are helping to lay a strong foundation for Canada's long-term prosperity.

Mr. Chair, this concludes my formal remarks. I thank you for the opportunity.

[The Chair, Liberal, Derek Lee]

Thank you for that.

I'll now turn to the National Research Council Canada, Pat Mortimer, vice-president, technology and industry support.

[Pat Mortimer, Vice-President, Technology and Industry Support, National Research Council Canada]

Thank you for inviting the National Research Council to your meeting.

The National Research Council is a powerful tool of the federal government, with a mandate to transform science and technology into social and economic well-being for Canada. It does this working closely with industry, and indeed working with industry has been its mandate for its whole 93-year history.

One of the key programs that NRC has for working with industry is its industrial research assistance program, or IRAP. IRAP provides innovation support to technology-based Canadian small and medium-sized enterprises, or SMEs, and has been doing this as part of NRC for over 60 years. It delivers the program through a network of experienced technology advisers located in more than 100 communities across the country. They work directly with the SMEs to address their technology challenges with advice, guidance, and business assistance, but also some financial support.

IRAP's financial support is for R and D projects or R and D related expenses, and the cost is shared with the company, ensuring their own investment in R and D. We generally pay the cost of the salaries of the technology workers involved in the projects and do not pay general operating or infrastructure costs.

The amounts may be small, but they come at a critical time in the evolution of a small business. Last year we provided $70 million in contributions of this type to firms. There is a strong demand for these funds, and last year the program was fully committed very early in the year, as early as May.

IRAP also administers a program with funding from HRSDC to help SMEs hire graduates from universities and colleges. Through this youth program, IRAP helps the small business hire graduates by paying a portion of their salary. It's a very successful program. We've found that 91%, on average, of these students are eventually hired by the firms.

The incremental resources that IRAP received through the budget of $100 million a year for two years will be invested in these two highly successful programs: the contributions to firms for R and D and the youth program. As such, they'll use the existing IRAP terms and conditions, existing management frameworks, and existing delivery systems. This has allowed us to move quickly and to get the money into the hands of Canadian SMEs. The full $200 million will go to firms. There are no operating funds for NRC-IRAP included in this funding.

For these funds, we will use the same criteria for selecting projects as in the past, but we will be focused on selecting projects that contribute to innovations that will position these firms for the future. We're not supporting just to survive through the difficult times, but to allow them to prosper and grow when the economy turns around.

As these are well-established programs, we have robust management and control systems already in place: existing terms and conditions, standard operating procedures, a standard contribution agreement, a risk-based management framework, and lots of audits and evaluations. We've been audited seven times in the last five years.

These additional funds provided to IRAP by budget 2009 are very much appreciated, and the access to them through vote 35 was critical for their delivery. In order to optimize the expenditure of the funds, commitment authority is needed early in the year, and waiting for supplementary estimates would probably have necessitated the lapsing of funds. Since it's a large amount incrementally, in proportion to the NRC budget, we were not able to cash-manage it ourselves. Based on the experience we have with the program to date, we estimated that $76 million of the $100 million would be required from vote 35.

How are we doing with committing them? We are right on schedule. Our regular A-base contribution to firms was fully committed as of the first week of April this year. For the new funds, as of May 31, 57% of the $71 million for firms was committed, and 90% of the funding for the youth program was committed. They're moving quickly, but I want to assure you that we're treating them with the same due diligence and attention to documentation that we would in any other year.

We've committed to targets for the number of new SMEs to be reached with these funds of 720 this year and 640 next year, and for the youth program, 333 graduates supported this year and 667 next year. We are fully confident that we can meet these targets.

We're also monitoring the number of jobs supported. As of May 31, we have already identified 1,773 jobs supported in 458 new firms and 178 graduates hired through these vote 35 funds.

So the uptake of these new funds has been outstanding, and I want to thank Parliament for their continuing support of NRC and the IRAP program.

[The Chair, Liberal, Derek Lee]

Thank you very much for that.

I'll now turn to Atomic Energy of Canada Limited, to Michael Robins, senior vice-president and chief financial officer.

[Michael F. Robins, Senior Vice-President and Chief Financial Officer, Atomic Energy of Canada Limited]

Thank you very much, Mr. Chair. I will abbreviate my remarks to reflect the time availability.

First of all, Mr. Chairman and honourable members, I would like to thank you for the opportunity to be here today to discuss approved vote 35 funding of $222 million provided to AECL.

A national nuclear energy program, safety support to provincial and international reactors, isotope production, and other essential R and D require investment. Let me describe the public investment in AECL as a commercial crown corporation.

AECL currently receives an annual parliamentary appropriation, included in the main estimates, of $103 million to support the ongoing operations of the large, complex, and aging Chalk River nuclear laboratories. Incremental funding for health, safety, security, and environmental projects totalling $6 million was also included in our 2009 appropriations.

Chalk River Laboratories, which employs about 3,000 of the country's best scientists, engineers, and technical staff, is where Canada's unique and successful CANDU nuclear energy program was born in the 1940s. The primary public policy objective of Chalk River is to carry out nuclear safety research, nuclear R and D, new reactor development, isotope production, and nuclear waste management.

Budget 2009 provides a $351 million one-time cash contribution to AECL for 2009-10 operations, including ongoing support for the development of the advanced CANDU reactor and to maintain safe and reliable operations at the Chalk River Laboratories.

The vote 35 contribution approved in budget 2009 will be used as follows: $67 million for Project New Lease, which reflects capital projects and operations to upgrade the Chalk River site; $50 million to support ongoing Chalk River operations; and $105 million for the continuing advanced CANDU reactor design engineering and systems development in 2009-10.

Many of the items being funded are multi-year projects that extend beyond 2009-10. To date in 2009, we have spent $45 million on budget 2009 initiatives: $9 million for Project New Lease, $19 million for Chalk River operations, and $17 million for the ACR development.

Vote 35 funding has allowed AECL to support an estimated 1,600 positions: engineering and design jobs, construction, logistics, and security, to name just a few. Some of the funding is being used to pay for external labour and subcontractors estimated to create an additional 720 jobs outside of AECL.

AECL has a solid accountability framework and a sound governance regime in place, with appropriate mechanisms for financial oversight on spending, including approval and monitoring processes. The Chalk River projects, including PNL, are approved by the science, technology, and nuclear oversight committees of our board of directors, and they are monitored quarterly by the board.

ACR development timelines and expenditures are monitored by the project risk review committee of the board, and recently completed internal audits on both Project New Lease and advanced CANDU reactor projects were provided to the audit committee of the board. Washington Safety Management Solutions, an independent firm, reviewed the PNL plan to ensure that the infrastructure and process improvements were required to meet the regulatory and safety standards.

Specific budgets and monitoring processes are in place. Monthly and quarterly management meetings confirm we are tracking to plan.

And finally, the Office of the Auditor General reviews AECL's systems and practices and audits us on an annual basis.

To conclude, nuclear technology is a proven and reliable source of clean energy. In Canada and around the world, energy authorities are investing in nuclear power to meet energy security and climate change goals.

Continued government support for maintaining safe and reliable operations at the Chalk River Laboratories, as well as the development of the advanced CANDU reactor, will help strengthen Canada's nuclear advantage and generate significant value to Canadians through the creation of high-paying jobs. Vote 35 funding has enabled AECL to invest in these important jobs and to improve the safety of its nuclear infrastructure. It is seizing this opportunity, which is foremost in our goals at AECL, while being an effective steward of taxpayer money.

Thank you Mr. Chairman.

[The Chair, Liberal, Derek Lee]

Thank you as well. I'll now turn to the Department of Human Resources and Skills Development.

Mr. Frank Vermaeten, senior assistant deputy minister, skills and employment branch, is going to deliver the remarks.

[Frank Vermaeten, Senior Assistant Deputy Minister, Skills and Employment Branch, Department of Human Resources and Skills Development]

Monsieur le président and members of the committee, I am pleased to be here before you today to talk about vote 35 and its implications for the supplementary estimates for 2009-10 for the Department of Human Resources and Skills Development Canada.

As you heard, my name is Frank Vermaeten. I'm the new senior ADM--I emphasize the “new”--and I have a team with me here made up of Su Dazé, our acting chief financial officer; Joanne Lamothe, our assistant deputy minister of program operations; and Liliane Binette, our ADM of operations at Service Canada.

Last January the government introduced Canada's economic action plan to address the pressures facing Canada and Canadians during the global economic downturn. Many of the initiatives, programs, and services that were introduced and enhanced are being delivered by the Department of Human Resources and Skills Development. They are designed to support the unemployed, preserve jobs, and retrain workers for jobs of the future.

We are here today to discuss three HRSDC initiatives arising out of the Economic Action Plan. These did not appear in the main estimates of May 5^th which came out just a few days after the announcement of the plan.

As a result, it was understood that adjustments to the main estimates would be required to ensure that new funding could flow quickly and in a timely fashion for the implementation of the stimulus measures arising from the plan. The approach taken was to seek funding through supplementary estimates (A) for $455 million as well as through Treasury Board vote 35 for $269 million.

Treasury Board vote 35 was created to provide Treasury Board ministers with the authority to approve the direct allocation of funds to supplement departmental appropriations for expenditures required before the next opportunity to obtain parliamentary approval of increased appropriations.

What this means, Mr. Chair, is that departments like HRSDC could have access to additional funding to facilitate the implementation of the economic action plan. Access to vote 35 funds is considered bridge funding that will be included in subsequent supplementary estimates. It can be used only between April 1 and June 30, 2009. We have requested access to vote 35 funds for the following three measures: first, the strategic transition and training fund in the amount of $250 million; second, $15 million for the YMCA and YWCA grants for youth internship; and last, additional funding of $4 million for the Canada summer jobs program.

Let me take a few moments to explain the specific reasons for each of these requests.

The Strategic Training and Transition Fund will provide new funding to support provincial and territorial programming to help meet the training needs of workers. The fund is worth $500 million over the next two years and will be administered through existing labour market agreements with provinces and territories. The government currently has signed agreements with nine provinces to implement the Strategic Training and Transition Fund, and we expect to sign labour market agreements with Newfoundland and Labrador and the territories in the very near future. This new Strategic Training and Transition Fund is available to all employed and unemployed Canadians, both EI- and non-EI-eligible, with a particular focus on low-skilled workers and those in communities or sectors affected by the economic downturn. It is designed to provide provinces and territories with significant flexibility, to allow them to identify labour market priorities in their regions, and to develop programs tailored to their specific and respective needs.

This new strategic training and transition fund is available to all employed and unemployed Canadians, both EI and non-EI eligible, with a particular focus on low-skilled workers and those in communities or sectors affected by the economic downturn.

It is designed to provide provinces and territories with significant flexibility to allow them to identify labour market priorities in their region and to develop programming tailored to their specific and respective needs.

Each province and territory will receive an allocation based on their average share of unemployed, based on data from Statistics Canada from August 2008 to January 2009. Small jurisdictions, which include P.E.I. and the territories, will receive base funding plus their proportion of funding based on the average share of unemployed for that same period. Each province and territory's allocation will be updated in 2010-11, based on the average share of unemployed from August 2009 to January 2010, to reflect changes in the number of unemployed.

Provinces and territories will receive their funding in two instalments, the first in the spring and the second by September of this year. Given that the majority of agreements were signed in late May, we are working with provinces and territories to ensure that they receive their first installment by mid-June, so in the next several weeks.

Let me now turn to the YMCA and YWCA youth internship. Through Canada's economic action plan, the federal government announced a grant of $15 million to the YMCA and YWCA to place unemployed youth in internship with not-for-profit and community service organizations with a focus on environmental projects. The internship will help young Canadians develop their skills and gain the work experience needed to secure employment. The full $15 million was obtained from Treasury Board vote 35 to enable HRSDC to sign grant agreements.

While the department has a long-standing relationship with these organizations, particularly the YMCA, the grants for youth internship is a new program. Therefore, new authorities and program tools had to be developed.

While the department has a long-standing relationship with these organizations, particularly the YMCA, the Grants for Youth Internships is a new program. As such new authorities and program tools had to be developed.

These steps have been completed, and the department has been working very closely with the YM-YWCA to conclude these agreements. The agreements are expected to be in place by mid-June, after which funding will flow. Internships are expected to begin this July.

Access to Treasury Board vote 35 is being requested to allow this budget 2009 initiative to move forward prior to approval of supplementary estimates (A).

Lastly let me turn to Canada summer jobs program.

Canada Summer Jobs is a highly-valued and popular program that helps thousands of students in virtually every community across Canada to gain work experience, while also providing extra help to organizations that deliver important community services.

Under Canada's economic action plan, additional funding in the amount of $10 per year in 2009 and 2010 was allocated to Canada summer jobs. This brings the total amount of funding for CSJ to $107.5 million in 2009 and 2010.

Of the additional $10 million, $4 million was requested under the supplementary estimates. It is an addition to the existing funding and will be distributed across the country's 308 constituencies. All applications have now been assessed, the MP validation phase has been completed, and employers have been notified of the results. Hiring of students began in May 2009.

As the program sends advance payments to the organizations by late May and early June at the latest, we are seeking access to Treasury Board vote 35 funds.

I trust this explains our rationale for using vote 35. I'd be happy to answer your questions.

Thank you. Merci.

[The Chair, Liberal, Derek Lee]

Thank you to all the witnesses.

Are any other witnesses here today who wanted to make a statement or make a presentation? I don't think there are. If there are none, then we're good here on this end.

Putting this thing in context, there are quite a number of witnesses here today, quite a number of departments. Our focus at the committee has been to review the stimulus spending as outlined in the government's budget, from the point of view of speed in the execution of the spending of the money and rule compliance. If there is a recession out there, it demands quick response. We're not saying, hurry up and comply with the rules, but we are saying, hurry up, you must comply with the rules. And lastly, someone has to be doing an account of job creation, and I know many of you have made reference to those issues here today.

So I'm going to turn to colleagues for questions. Ms. Hall Findlay, for the first eight-minute round.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much, Mr. Chair.

Thank you very much, everybody. It's not normal that we get so many people, and all at the same time. It's going to be difficult for us to parse it.

I want to focus on vote 35. I want to focus on the fact that we supported the budget, and in particular vote 35, because of a recognition that in a recession we needed extra money, incremental money, out on the street, if you will.

We have heard announcements for a number of weeks now, we've heard allocations, we have heard reannouncements, but we remain concerned that there hasn't been much evidence of money that has been put out into the street that is incremental to what would otherwise be there. I say that understanding the bridging nature of vote 35. This may have allowed that bridging in terms of future timing, but we still have not had any, or very few, answers and examples of specific cheques being cut so that jobs are being created now that otherwise would not have been.

I do want to commend Ms. Mortimer. In your piece you focus on some additional jobs that have been created; Mr. Robins from AECL as well; and Mr. Vermaeten, in particular the last piece on the summer jobs. But generally I think we have from Mr. Vermaeten an acknowledgement, which we've certainly understood, that this money has to be used between April 1 and June 30. I go back to “used”. We want to know what money has gone out that's over and above what would have been out there, that has actively created jobs now and over the next few months that are incremental, that would not otherwise have been.

Perhaps I can pick Mr. Lindsey. I didn't hear so much from you. We had understood there was a fair bit, and certainly the allocations industry has a lot. Can you give me some specific examples of jobs that are being created now, that are incremental to what otherwise would have been, thanks to money that I'm hoping you can tell me has been spent so far?

[Kevin Lindsey]

Perhaps I could go back to the technical point with respect to vote 35, and then I'd be happy to talk about the jobs issue.

I believe I heard an understanding that the money from vote 35 actually had to be spent by the end of June; but in fact, the money must be allocated by Treasury Board by the end of June, and there is authority to spend that money right through the rest of the fiscal year.

With respect to the substance of your question, the Canadian Youth Business Foundation, as an example, has received their funding. It is a program that has existed, so it will constantly be in the process of reviewing proposals from young entrepreneurs and making those allocations. I can't quantify for you the number of loans or jobs that have been created as a result of this incremental money, because it has just flowed to them.

With respect to the marquee tourism events program, we have announced support for 10 events this summer season so far. We have no evidence of the incremental job creation that might be associated with our funding. In fact, the principal objective with respect to that program was to minimize the extent to which the economic situation would result in reduced attendance at those events. So the key there is to help those events maintain or increase attendance in spite of the economic situation.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I'm sorry, can I clarify that? Did you say that the purpose of the marquee tourism money was not, in fact, to increase jobs but to increase attendance?

[Kevin Lindsey]

In increasing the attendance, there will be a jobs impact, clearly.

[Martha Hall Findlay, Liberal, Willowdale, ON]

How does that happen?

Let me back up. The purpose of our approval of this money was for additional jobs—either a reduction in the number of jobs that would otherwise be lost, or additional jobs. The whole point of this unusual vote 35 was that.

A couple of times you've suggested that we don't know, that we don't have the evidence of additional jobs, that we don't know what those are. But has that not at least been part of the mandate for the allocation of these funds?

[Kevin Lindsey]

I think the answer to your question lies in your first premise, which is that if we're not clearly creating new jobs, are we at least preventing the loss of existing jobs?

[Martha Hall Findlay, Liberal, Willowdale, ON]

But we still need to know what those numbers are. If you say we don't have evidence of either, it sounds as though that's not even part of the mandate.

[Kevin Lindsey]

Not at all. The issue with that program is that none of the events have actually occurred yet, so we don't know what the attendance will be, and we don't know what jobs are associated with the events. Once the events occur, we'll be able to quantify the impacts better, both with respect to the maintenance of jobs and the creation of new jobs, and the impact on attendance.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I remain a little confused about the primary purpose being increasing attendance. But in any event, we are short of time, and I do want to ask the next question of Mr. Robins.

Needless to say, AECL has been in the news a little bit lately, and given what was learned in the last day or so, we do have a rather astounding number, the $1.7 billion, that has been spent since 2006. Now, what I ask about is outside of vote 35, but given the events of the last day or so, I feel obliged to ask you about the amount of $72 million allocated for decommissioning. We don't know where it is in the budget.

Can you speak to that? Where is that money supposed to be coming from?

[Michael F. Robins]

The $72 million is part of the $351 million appropriation, or one-time funding, that we've received. It's $25 million related to the decommissioning of the dedicated isotope facilities and $47 million related to the isotope supply reliability program.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay, so the $72 million is actually part of the $351 million?

[Michael F. Robins]

Yes, it is.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Mr. Vermaeten, with respect to the numbers that you had for the summer jobs program, can you tell us if allocations have to be done? The use of the word “use” means that the money has to be allocated before the end of June. I think Mr. Lindsey suggested that the money had to be spent in this fiscal year. A number of things you're talking about actually cover two fiscal years. Does it have to be spent in one fiscal year or can it cover two? Can you give me any other examples of actual jobs being created? The summer jobs program, as nice as it sounds—and I commend you on it—is really not much in the grand scheme of things, when you consider current job losses and the job creation that we need to see.

[Frank Vermaeten]

I think Mr. Lindsey articulated it much better than I could. Once the amount is allocated to our department, we have until the end of the year to spend it, and we certainly intend to do that in this fiscal year.