Government Operations Committee on March 20th, 2007

[The Chair, Liberal, Diane Marleau]

Order, please.

We have before us today some representatives of the people who look after the real property of the Government of Canada.

Perhaps I'll let you introduce yourselves.

We're very interested in what is happening with the buildings and property of the federal government, so we've decided to get an overview of what exactly we own, where it is, and how it is managed. Also, I would like to say we're interested in those properties that are leased, as well, because that's all part of it.

What we do normally is give you about 10 minutes to share among the three of you, if you have a presentation, and then we go to questions and answers.

Would you please introduce those with you.

[Mary Chaput, Assistant Secretary, Government Operations Sector, Treasury Board Secretariat]

Thank you, Madam Chair.

My name is Mary Chaput. I'm the assistant secretary for a section of Treasury Board Secretariat called government operations.

With me today are Ms. Shirley Jen, Senior Director of the Real Property and Material Policy Division, and Ms. Ruth Brady, a senior analyst from the same division.

Good afternoon, and thank you for having us.

I will take a few moments to present three components to you. First, I would like to explain to you what we are referring to when we talk about real property, in particular federal real property. Second, I would like to give you an idea of the scope of federal Crown assets. Third, I will talk about Canada's governance regime. I will conclude by giving you a description of the legislative and policy regimes that govern the daily activities dealing with federal organizations real property, and of the key players' roles and responsibilities.

After my presentation, I will be pleased to answer your questions.

Simply put, real property is any right, interest, or benefit in land. Real property includes such things as land, building structures, or other improvements that are on, above, or below the land. Federal real property under the Federal Real Property and Federal Immovables Act is defined as “real property belonging to Her Majesty, and includes any real property of which Her Majesty has the power to dispose”. Federal responsibility for real property is limited to that required for federal government operations.

The land mass in the federal inventory is 30.7 million hectares, excluding the far North. It is therefore smaller than the land mass of Nova Scotia. Whereas 93% of the federal land mass is Crown owned, 7% corresponds to other kinds of legal interests, mainly leases.

The departments are real property custodians so that they can carry out their programs. The major custodians of federal lands are the Parks Canada Agency, National Defence, Agriculture and Agri-food Canada, Environment Canada and the National Capital Commission.

In other words, the lands are used for the various needs of programs across the country and include assets like our national parks, training areas and rifle ranges for the armed forces and the RCMP.

You will note that the federal government holds just over 46,000 buildings in Canada and abroad, 90% of which are Crown-owned. Most of the rest are leased.

Let me just stop here for a second to note that this figure includes a broad range of buildings, from the very small, such as supply depots, to the very large, such as office buildings and laboratories.

National Defence, as can be seen on slide 5, is by far the largest custodian of buildings, ranging from large defence facilities to armouries to residential housing. For context, CFB Gagetown is alone identified as having over 1,900 buildings.

Parks Canada holds a large number of buildings overall as well, most being small, such as residences for park personnel and storage buildings.

RCMP and Correctional Services are also in the top 10 custodians, given that their holdings include prisons and RCMP detachments across Canada.

PWGSC does not have a large number of buildings in its inventory in comparison with these other custodians. That said, it is second only to National Defence in terms of floor space, given that 400 of its some 885 buildings are office towers with significant floor space.

Treasury Board Secretariat maintains a central database of all real property, the Directory of Federal Real Property, which is updated by 88 organizations. The data input in the base deals particularly with the following aspects: whether or not the asset belongs to the government or if it is leased, the purposes for which it is intended, the number of buildings and the square footage. The system can produce various reports dealing with different parameters.

The Federal Contaminated Sites Inventory includes the key characteristics of the contaminated sites, their location and how they are being managed. It is up to the departments to input the data in the directory and to ensure each year that the data is complete and accurate.

Both of these directories can be consulted by the public.

All federal real property in Canada belongs to Her Majesty. Federal real property is assigned by the Governor in Council to ministers for their use in running their departments and delivering their programs.

Ministers have administration of the real property. Administration, another legal term, simply means that the minister is responsible for stewardship of real property that belongs to Her Majesty.

Organizations whose ministers have administration are commonly called custodians. Organizations that use real property under the administration of another minister are commonly called tenants.

Two commonly known custodian-tenant relationships are that which PW has with the many other government departments that reside as tenants in federally held buildings, and second, the diplomatic and consular program, where DFAIT has custody of real property abroad that is also used by tenants such as CIC and the RCMP in the delivery of consular and diplomatic services.

Generally, federal real property falls into one of three categories: departmental real property; land defined under legislation as Canada lands, which I'll explain a little later; and real property under the responsibility of crown corporations.

Real property that falls within the latter two categories is managed according to the applicable legislation, such as the Indian Act in the case of reserves, and in the case of other pieces of property, enabling legislation that governs crown corporations, such as the National Capital Act.

The remainder of my presentation, in particular the policy direction I will talk about, relates to the shaded box on the left of slide 7: federal real property under the custodianship of departments and agents defined by the Financial Administration Act.

Federal real property is managed through a framework of legislation, regulation, and policies that are designed to promote sound stewardship of public assets. Ministers, as mentioned, have administration of real property for the purposes of their departments in accordance with the Federal Real Property and Federal Immovables Act and its attendant regulations. The federal real property regulations provide ministers with the authority to acquire and dispose of property.

Treasury Board draws its authority over the management and development of lands by departments from the Financial Administration Act. Treasury Board, through mandatory policy instruments, sets the parameters within which all ministers and deputy heads exercise their various authorities relating to the management of real property.

Treasury Board is assisted primarily by the secretariat, which is responsible for policy development and interpretation. The secretariat also supports departments in facilitating cross-cutting issues such as disposal of strategic properties, and provides leadership in promoting horizontal initiatives such as the action plan related to contaminated sites.

Management policies for real property have recently been reviewed. Following that review, new policy instruments were approved by Treasury Board and came into effect on November 1st, 2006.

The ministers also approved a new policy framework for assets and acquired services, including real property. This framework sets the direction for the management of assets within the federal government. It sets out the main management principles and strategic direction in order to ensure there's value for money and to manage the framework of program delivery.

The new policy instruments for the management of real property that reflect the broad management principles set out in the framework have been designed to establish mandatory rules that deputy heads are expected to follow in exercising their authority in the area of real property.

As mentioned earlier, ministers have administration of real property for the purposes of their departments' mandated programs. Policy direction is premised on this fundamental ministerial accountability.

The deputy head is responsible for the management of the department, including its assets. The policy on management of real property requires that deputy heads ensure that their departments meet key operational objectives, such as value for money and sound stewardship.

Management of real property by a department should include a systematic, structured process that covers all activities on a life-cycle basis. It starts with long-term planning of investments in real property that takes into account government priorities, departmental objectives, and other resource strategies in the department.

The next step in the life-cycle phase is the acquisition of the asset, giving consideration to all options available to meet the requirements and achieve value for money. This would be followed by a portfolio management approach to the ongoing use of the asset, and regular assessment of asset performance in continuing to meet the operational requirement. Finally, when there's no longer a program need for the asset, the department would undertake steps toward disposal.

Aside from the policy on management of real property, other policy instruments set direction on the life-cycle management of assets, including the long-term capital plans, policies on expenditure and financial management, and various directives and standards, such as the directive on disposal of surplus real property. The disposal directive is aimed at departmental real property managers, who assist the deputy head in meeting policy requirements in an area that can be quite complex, owing to the number of stakeholders and the extent of public interest.

Policy instruments are all available on the TBS website, so in the interest of moving along today, I'll not go over the individual requirements. However, honourable members may wish to review those in which they have a particular interest.

Deputy heads are expected to demonstrate value for money and sound stewardship by ensuring that key integrated management components are in place within their organizations, so as to support departmental programs while continuing to contribute to broader governmental objectives, such as preservation, the protection of heritage buildings, and environmental concerns.

They are responsible for implementing an effective management framework that includes departmental procedures, processes, and systems; reflects a life-cycle approach; and is integrated with program expenditure, financial, and human resource-related considerations, in support of an integrated decision-making framework. It's expected that management decisions are fair, open, and transparent, as well as the transactions related.

Before concluding on the subject of policy requirements, I would like to stress that under Treasury Board policy guidelines, the deputy heads must ensure that the monitoring of practices and control mechanisms for real property are in place within their departments, and that performance reports are produced on management.

The reports are produced in various ways, such as the presentation to the minister of a long-term investment plan, the current contaminated site management plan and the reports produced under Treasury Board guidelines to guarantee, generally speaking, the oversight of policies or transactions concerning real property that are considered to be very complex or risky.

The Treasury Board and its secretariat are responsible for overseeing management performance across the government. The information is collected through various activities: the review of the department's long-term investment plans and related presentations; the ongoing discussions and committee work on the issues and policies related to real property; the study of audits and reviews of issues related to real property.

While TBS develops administrative policy, other federal organizations play a key role in setting government-wide policy or in providing real property services that impact on the management of real property by custodians and tenants.

Environment Canada provides advice on all environmental matters, including contaminated sites, species at risk, and environmental assessment. Environment Canada works with other government departments through a consultative process to establish federal environmental goals and objectives and develops regulations, directives, and guidelines.

Parks Canada establishes national goals to protect federal heritage buildings and national historic sites.

Indian and Northern Affairs provides information on whether federal property is in an area subject to a treaty, whether there are ongoing claims or asserted claims, or if there is evidence of use and occupation by aboriginal groups.

Service organizations--and I assure you that I am coming to the end--with significant influence on real property management include the Department of Justice, which acts as the solicitor for departments for real property transactions, searching out legal title and assessments related to aboriginal right and title, including the legal duty to consult; PWGSC, which aside from accommodating 105 other organizations in their office buildings under the office accommodation program, provides a considerable range of services related to tenants and custodians; and the National Capital Commission, which has legislated responsibility for real property within the national capital region.

Finally, I make mention of the Canada Lands Company Limited, the fundamental purpose of which, as a non-agent crown corporation, is to ensure the commercially oriented, orderly disposal of strategic surplus property to achieve best value for the Canadian taxpayer.

I have provided you with an overview of the Federal Real Property Directory, I have presented you with the governance and related management practices, and I have described to you the roles and responsibilities of the major stakeholders in the management of these assets.

Much of the information I've provided today is available in more detail at the websites listed above, which you may or may not be interested in visiting.

That said, I'm happy to take your questions.

[The Chair, Liberal, Diane Marleau]

Thank you very much.

We'll go to Monsieur Simard.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Madam Chair, and thank you very much to our witnesses here today.

Forty-six thousand buildings is an impressive number. I would assume that some of these buildings were bought forty, fifty, or sixty years ago. Do we have an idea, first of all, of the average age of our buildings, and secondly, of their net worth? If you bought them in 1930, they have probably increased in value--you would hope.

Do you have those two figures for us?

[Mary Chaput]

If I may, I'll address first the question of net worth.

As you might imagine, net worth is a bit of a moving target. It fluctuates day to day with market rates, interest rates, and circumstances on the ground. We do have, however, in the public accounts an indication of the book value of those 46,000 to 47,000 properties, and that number comes to $26 billion. I stress that this is a number that fluctuates with circumstances and over time.

As for the age of those properties, you're right, many are quite old. While I don't have a number for you on the average age of all 46,000 or 47,000, I can tell you that of the approximately 7,000 properties held in the Public Works portfolio--granted, a very small slice of 47,000--the average age is in the order of 40 years.

[Raymond Simard, Liberal, Saint Boniface, MB]

The average age is 40.

[Mary Chaput]

I really can't tell you whether that's a proxy we could apply more generally.

[Raymond Simard, Liberal, Saint Boniface, MB]

Are we still purchasing buildings? Are we moving towards, for the private sector, providing buildings for our bureaucracy?

[Mary Chaput]

I would suggest that there is a constant ebb and flow around the acquisition of property and the divestiture thereof. The degree to which we buy as opposed to leasing depends on a number of factors.

I have taken certain cases to Treasury Board recently where the Minister of Public Works was entering into new leases. However, in some cases those leases were motivated by a department's efforts to consolidate, to divest itself of a number of small, scattered leases and consolidate in one building. In other cases it has been because of programs being created or program growth.

So yes, sir, we are in the course of buying and leasing at various junctures. But typically speaking, and more broadly, I would say that there is at least a soft strategy at play to not add to the size of the federal inventory at this stage, and that's for a number of reasons. It sometimes ties up cash for longer periods of time than is necessary.

It's also, though, a function of the fact that many programs, as you would know, are funded on a temporary basis these days, where funding is available for three years or one year. It may be a task force or something, in which case PW looks very hard, if we're talking about office accommodation, where there may be pockets of space in already existing buildings, at filling in those pockets.

[Raymond Simard, Liberal, Saint Boniface, MB]

The Treasury Board has also created an agency for the public service that is a substantial part of what they do as well. What is it called?

[Mary Chaput]

PSHRMAC.

[Raymond Simard, Liberal, Saint Boniface, MB]

PSHRMAC, exactly. I wonder, it seems to me that this would be an opportunity as well to create an agency that would oversee all of the management of our buildings. Has that been considered at all?

[Mary Chaput]

I don't know that there's an active proposal of that type on the table.

[Raymond Simard, Liberal, Saint Boniface, MB]

Okay.

National Defence has 20,000 buildings. It's almost half of the buildings. Do you treat them differently? Is National Defence responsible for looking after all of the maintenance, the management of those buildings? Is it that department that is responsible?

[Mary Chaput]

The Department of National Defence would have all the same responsibilities as a typical custodian or tenant to the degree that they're in a building that they are renting via Public Works. What is different about them, though, is that much of what they hold is special purpose space, i.e., not office space. So there is, I would say, a different level of engagement between departmental officials and the maintenance of special purpose space. It usually requires a much more unique type of expertise, typically a more hands-on management style.

Other departments that would have the same kind of challenge might be departments that have an ops centre. DND does, but so does Public Safety and Emergency Preparedness, RCMP, etc. The degree to which the property is specialized has an impact.

As well, there are thresholds above and below which ministers are authorized to operate. I would venture to say, and we can check the details for you here, that DND may have a higher threshold than, for example, a minister who or a department that is not a particularly big player in the property business.

[Raymond Simard, Liberal, Saint Boniface, MB]

Does the secretariat keep an eye on the yearly maintenance costs as well, and if they have increased, are there red flags that go up--for instance, if they're not consistent?

[Mary Chaput]

What the secretariat keeps an eye on is the rust-out costs that are brought to our attention. The rust-out costs would typically be described to us in terms of the portfolio writ large, but from time to time we do become very aware of particular cases of rust-out, especially where they go to health and safety issues.

Two examples I would give you have to do with museums that were quite recently given a certain amount of cash over a number of years and the National Arts Centre. Both had rust-out problems that were funded in the order of $100 million over a number of years, the bulk of that going to the NAC.

However, in direct answer to your question, we don't track at the secretariat, on an explicit basis, what the maintenance costs are in a given building.

[Raymond Simard, Liberal, Saint Boniface, MB]

With regards to the 493 buildings abroad, I would imagine the bulk of them are embassies.

[Mary Chaput]

Those would be embassies. They could be residences, both official residences and consular. At most of the embassies they have office accommodation, but as well there is sometimes special purpose space for receptions, etc.

[Raymond Simard, Liberal, Saint Boniface, MB]

Does Foreign Affairs look after those buildings?

[Mary Chaput]

Foreign Affairs would oversee it from a management point of view. But the departments that are located abroad, such as CIC, for example, would pay Foreign Affairs for both the floor space and, I believe, a portion of the overhead that's associated with being accommodated with the embassy.

[Raymond Simard, Liberal, Saint Boniface, MB]

Would Foreign Affairs as well decide if a new embassy is required? I was in Berlin a couple of years ago, and they were building a new embassy there.

[Mary Chaput]

Foreign Affairs would bring to Treasury Board any requirements to close an existing site where we are represented abroad and to open one. Both of those issues would ultimately find their way to Treasury Board. Before that, they would find themselves at a policy committee, whether or not it's a discussion from a representation point of view.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you, Madam Chair.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Thank you, ladies, for being here today. Did you say that there is a centralized database? Does it really exist? Does the Treasury Board Secretariat have the data on all real property that the various departments and institutions... In other words, do you have a complete picture? In the affirmative, and if you were searching for the average age of a building, or if a research assistant was asked to do that job, this data would be available on the site, which furthermore would be user-friendly enough for the average person to do that kind of research. You may not know the age of the buildings off the top of your head, but we know that those belonging to Public Works and Government Services are 44 years old.