Public Accounts Committee on March 23rd, 2015

[The Chair, NDP, David Christopherson]

Sorry, Mr. Falk. Your time's expired. Thank you.

Cheez Whiz is included, eh?

Back over to you, ma'am. Ms. Jones, you have the floor again.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you.

You were talking obviously about some of the items that are included. I think we all received a submission from Ms. Angnakak who made a presentation to the legislature in Nunavut and shared it with our committee, or at least I did.

One of the things she asked is that they start re-examining the issue of essential non-food items that are eligible for subsidy under the program. She pointed out things like diapers and other things you need for the care of children, and I wonder if the committee is considering that.

Second, in my last round of questioning I asked about the RFP that was put out asking for communities to get engaged and provide for different subsidy models. I didn't get a response, but is it the intent of the department to look at a different program or a different way of providing for the subsidy, and has there been any interest or any submission made?

[Colleen Swords]

With respect to the last question, since it follows on a previous one, the RFP for that has been awarded now. It's going to Interis. It is starting work this month, March 2015. It is basically looking at types of methodologies you could use to set subsidy rates, all kinds of different possibilities, and it is also looking at a plan for how you would engage with communities to have a discussion about that.

So far there hasn't been a desire to move from the overall objective, which is to focus on perishable nutritious food, except in Old Crow, where they have absolutely no access at any time of the year. You actually can get a subsidy for some things like diapers there, but that's the only community that falls into that category right now.

The issue is that, when you have a certain amount of funds and you want to focus on perishable and nutritious, if a community has a winter road, or it has access to the sealift, then the desire is to try to get it to use that for things like diapers. It takes a certain amount of planning in advance so you would get your year's worth at one time, but that's the theory.

[Yvonne Jones, Liberal, Labrador, NL]

I have a couple of other things as well, because she made some really good points in her address. One of them is that she suggested that retailers have been able to negotiate cargo rates with the airlines that are sufficiently low and it allows the retailers to actually make a profit on the difference between what they would normally have to pay to ship the food and what they would receive from the federal government through the nutrition north program.

Is this known to you? Are you aware that this may be the case in certain situations? If so, have you been addressing that particular issue?

[Colleen Swords]

Generally speaking, there is probably a need to look at subsidy rates overall, depending on what the rates are. Indeed, there was an intention to try to get retailers to negotiate for the best rates, but then to pass them on to the consumer. That's the trick. How can you determine that the best rates are being passed on? That's why we're trying to get at some sense of assurance on profit margins.

[Yvonne Jones, Liberal, Labrador, NL]

Obviously, their concern is that it's happening, but the retailer is getting a greater profit and that profit is not being passed on.

The other thing I found very interesting, which they pointed out, was that information that was currently being published by nutrition north Canada stated that if a customer in an eligible community wishes to purchase perishable items or food from a direct supplier in the south instead of a northern retailer, then they can. We all know that for individuals this is difficult. You have to have the financial ability up front, which very few do. But for certain programs in schools or restaurants they might be able to do direct orders.

What I found interesting is that while you promoted the program, they indicated that there's currently only one Ottawa-based registered southern supplier that would allow for direct shipping into the Nunavut region. That being the case, obviously, there is no competition. If they choose that route, they really only have one option. I'm wondering why you would put that out there. Obviously, it would work if there were competition, but without the competition or some kind of impact on developing further competition it's really not going to work to the advantage of the consumers in the north.

[Colleen Swords]

Under the old food mail program, there were personal orders and there was a desire on the part of some to continue it in some fashion where you could do it yourself. But the way we're operating now, with much greater compliance and information needed on who's getting the subsidy and what's being done with it, what it's translated into is that those suppliers have to be registered with us and they have to have a contribution agreement with the department, and they have to provide us with the information that we require in order for them to be eligible for the subsidy. There's a choice that has to be made by the suppliers as to whether or not they want to fulfill those requirements.

[The Chair, NDP, David Christopherson]

Okay, thank you. Time has expired.

Back over to Mr. Aspin, who now has the floor.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

Ms. Swords, in response to my colleague, Mr. Bevington, with regard to program increases, you alluded to the fact that in November of last year the parliamentary secretary announced increases of 5%, an escalator-type arrangement. Could you elaborate on that? That seems like a fairly healthy increase. You made some reference to sustainability. If you could just elaborate on that, I'd appreciate it.

[Colleen Swords]

I should probably make sure I spoke correctly in my opening statement. The announcement that was made of the additional $11.3 million was for 2014-15, so for this year, and then 5% every year compounded thereafter. The 5% is a recognition that demographically there are increases in the north and of the success of the program. We've had 25% more nutritious perishable food. The volume's gone up. The demand is there and it's increasing. We don't expect that to change. It's reflecting the historic trend over the last three years of the nutrition north program, which is showing that there's demand.

Because of all the information that we're insisting on, and the compliance requirements, we know that subsidy is going to nutritious perishable food and not things that could otherwise be sent up in other modes of transportation.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Just to be clear, a 5% escalator, year after year, in an inflationary environment of about 1% to 2% is pretty healthy.

[Colleen Swords]

It is meant to cover the demographic. The population is increasing, and of course, the population is often young, and you want to make sure they're getting nutritious perishable food. They're the ones we try to focus on, so it's worthwhile keeping that demographic in mind.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Mr. Ferguson, I guess you've indicated the constraints you recommended to the department in evaluating the services. What would your office do to ensure the subsidy is being passed on to the consumer?

[Michael Ferguson]

Again, we have recommended that the department make sure that they have access to the information they need to know whether the subsidy is being passed on to the consumer and to make sure that's built into their compliance contracts, and that they focus on understanding how to evaluate that this subsidy is being passed on to the consumer.

We've heard a couple of times about a significant increase in the volume of food shipped. While that may be one thing to keep on eye on and certainly is an indicator, the problem is that it tells you how much is shipped but not how much is purchased. Again, I think it's about making sure there are ways for the department to have a better assurance that these subsidies are being passed on.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Do you, sir, offer an assessment of this model, as opposed to the other model? Is that part of your department's analysis? Can you do that for us today?

[Michael Ferguson]

That was not the purpose of the audit, so we did not do a comparison of the two models. We looked at the nutrition north program, its goals and objectives, and whether the department had the information to indicate whether those goals and objectives were being met.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Okay, but you're confident, assuming your recommendations, that the department will meet its goals and objectives for this program?

[Michael Ferguson]

Something like ensuring that a subsidy is being passed on to consumers, and while it's easy for us to make recommendations, we understand that putting those recommendations in place and having enough information to be able to demonstrate that the subsidies are being passed on is not an easy thing to do.

We're very happy that the department has agreed with our recommendations and they recognize that there's more work to do. Again, as I think we've stated in the audit, it's to the benefit of everybody—the department, the retailers, and the people who live in these isolated communities—to have confidence that the program is achieving what it's intended to achieve.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

[The Chair, NDP, David Christopherson]

Thank you. That's very good; your timing is impeccable, sir.

We'll move back now to the NDP.

I understand that you'd like to split the time and that, Mr. Giguère, you're going to lead off. With that, you have the floor.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Ferguson.

I listened to the officials from Aboriginal Affairs and Northern Development Canada, and I have the sinking feeling that they are completely in denial.

In section 6.48 of your report, you indicated that there was no decrease in the cost, but rather an increase. The department official said that the commercial information was too sensitive to be released. However, you dismissed that argument in section 6.32.

In terms of whether the full subsidy is actually being passed on, in section 6.28, you refute the statement of the Aboriginal Affairs and Northern Development Canada officials.

The department official is still talking about an increase in volume. However, in section 6.43, you said that the number of kilograms of food transferred decreased. That means that nutrition is not being improved and that the amount of food is being reduced.

In section 6.20, you said that it would cost $7 million to give about 50 communities full access and that 5% will not be sufficient to address the food shortage in those communities.

I find your criticism quite harsh in your conclusion, in sections 6.57 and 6.58. I feel that there is some denial. In light of the testimony you have heard, am I completely wrong to think that? Are there in fact two contradictory stories?

[Michael Ferguson]

Again, the way I would characterize it is that it's very important for the department to know whether the subsidy is being passed on. The department has indicated things like volume in some places. Our response to volume is that it's just volume shipped; that's not necessarily food purchased.

I think the other thing is concerning the northern food basket, which has been mentioned a few times. We have indicated that we have some concerns with the northern food basket as well. There's not a way to verify that the prices that are collected during that process are accurate. There are 30 retailers that are not included, and that type of thing.

We're satisfied that the department has accepted our recommendations and recognized that there's more work to do. Again, it's about trying to get to understanding whether that subsidy is being passed on. I don't think anybody should underestimate how much work has to go into being able to get to that answer of whether or not that subsidy is being passed on.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Chair, since my colleague has questions and personally knows people who are starving, I will allow him to conclude.

[The Chair, NDP, David Christopherson]

Mr. Bevington, you have the floor.

[Dennis Bevington, NDP, Northwest Territories, NT]

I want to talk about a couple of things when we come to verifying the program. One of them is volume versus weight, which is of course an air freight issue. In your report, Ms. Swords, you talked about annual average volume going up, but actually it was the average annual weight that went up. There is a difference that you have to take into account, because of course we've changed the food items that are being subsidized and that changes the picture completely.

Air freight is based on two things. One of them is weight and one of them is volume. We can't really compare the two accurately sometimes, so I think there's some need to do that kind of work as well. When you remove lighter-weight items and replace them with heavier-weight items, that may not change the relationship of the pricing as much as you would consider, because they are two different things when it comes to air freight. I think it's something that has to be taken into account. You've changed the items that are being subsidized.

When average people go into the store in a remote community, they take the money out of their pocket and pay for the things they have to buy. What they see is the end result of that.