Government Operations Committee on Nov. 22nd, 2011

[The Chair, NDP, Pat Martin]

I call the meeting to order.

Welcome, everyone, to the seventeenth meeting of the Standing Committee on Government Operations and Estimates. We're meeting today to review the supplementary estimates.

Our first group of witnesses is with the Department of Public Works: Mr. Alex Lakroni, chief financial officer, and John McBain, assistant deputy minister, real property branch.

Welcome back, Mr. McBain.

We also have with us from the department Pierre-Marc Mongeau, assistant deputy minister, parliamentary precinct branch.

It's a very interesting selection of witnesses that we've compiled today.

Before we get going, I would like to recognize the wonderful job that has been done for us by our analysts and our researchers with the Library of Parliament, Tina Lise, Lindsay, and Édison. It's very helpful and high-quality work that's going to help guide us in our examination of the estimates.

We will have a brief presentation, perhaps, from the witnesses and then go right into questions from committee members.

Who would like to begin?

[Alex Lakroni, Chief Financial Officer, Finance Branch, Department of Public Works and Government Services]

Thank you, Mr. Chair.

Members of the committee, good afternoon.

My name is Alex Lakroni, and I am the Chief Financial Officer at Public Works and Government Services Canada. With me are John McBain, Assistant Deputy Minister of Real Property Branch, and Pierre-Marc Mongeau, Assistant Deputy Minister of Parliamentary Precinct Branch.

We are pleased to be here today as part of your review of the supplementary estimates (B), which were tabled on November 3.

Firstly, I would like to provide you with a high-level overview of the department's activities and its budget.

PWGSC plays an important role in the daily operations of the Government of Canada. As its principal banker, accountant, central purchasing agent, linguistic authority, and real property manager, we manage a diverse portfolio of real estate that accommodates 269,000 federal employees in 1,849 locations across Canada; we facilitate approximately 55,000 procurement-related transactions for goods and services worth about $16.7 billion per year; we manage the preparation of the annual Public Accounts of Canada and cash flow of more than $2 trillion a year through the operations of the federal treasury; we translate more than 1.7 million pages a year for federal departments and agencies, and provide translation and interpretation services for more than 1,700 sessions of the House of Commons, the Senate and parliamentary committees like this one.

PWGSC's financial structure is more complex than that of many other departments.

Turning to the department's total budget for 2011-12, PWGSC will spend $6.4 billion this fiscal year to deliver its mandate.

The department is heavily dependent on revenue, with 57% of its expenditures, or $3.6 billion, covered by revenue, as I mentioned earlier, primarily from client government departments for services rendered in support of their programs. This leaves a net appropriation of $2.8 billion approved by Parliament.

Of the $6.4-billion total budget, $1.1 billion is needed to deliver on our core programs, such as central purchasing and banking, public accounts, and payroll and pension services; $2.5 billion is required to pay for rent, fit-up, and utilities for government-wide accommodation, Receiver General treasury functions, such as banking fees paid to financial institutions, cheques, and envelopes, and translation services to Parliament; $502 million in capital is needed to invest in Government of Canada buildings and infrastructure; $2.3 billion is related to providing other services, such as real property and translation services, to client departments; and $5.2 million is required for contributions by the Translation Bureau to the language industry in Canada.

These supplementary estimates (B) request net funding of $125 million previously approved by the Treasury Board, resulting in a net appropriation of $2.8 billion for PWGSC.

I will briefly describe each major item now and will be happy to address your questions at the end.

In support of the long term vision and plan for the parliamentary precinct, PWGSC is requesting $64.5 million for the continued rehabilitation of the Parliament Buildings. Over the last few years, we have completed 15 projects on time and on or below budget, allowing us to vacate and start the much-needed rehabilitation of the West Block and the Wellington Building.

Another $39 million is needed for the additional office accommodation that PWGSC is mandated to provide to government departments and agencies. The cost of operating and maintaining buildings under the custody of PWGSC is approximately $2.2 billion annually.

In support of the cyber authentication renewal--e-pass replacement--initiative, $16.5 million is required for the implementation of a system to enable secure online transactions by Canadians by improving the protection of their identity and privacy and modernizing the authentication services.

PWGSC is responsible for meeting the accommodation needs of federal employees across Canada through a variety of approaches, including owning, leasing, and, most recently, public-private partnerships, or P3s. An amount of $15 million is required for the national investment strategy in order to make capital investments to preserve the useful life of crown-owned buildings.

In order to deliver phase two of the federal contaminated sites initiative, $5.2 million is required for the assessment, management, and remediation of contaminated sites.

In the current period of fiscal restraint, PWGSC will make good on its strategic review commitments made in Budget 2011, as evidenced by the $16.5 million in reductions included in this document. The department has fully met the objectives of the strategic review exercise for this fiscal year.

There are other smaller adjustments to the appropriations, and we would be pleased to provide additional details about these, if you wish.

Mr. Chair, these represent the key items for which PWGSC is requesting additional funds.

We would be happy to answer your questions.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Lakroni.

For our first round of questioning, for five minutes, Mathieu Ravignat.

[Mathieu Ravignat, NDP, Pontiac, QC]

Is that five or seven minutes?

[The Chair, NDP, Pat Martin]

Five, I believe.

[Mathieu Ravignat, NDP, Pontiac, QC]

Five? Okay. Sorry. I confused it with another committee.

Thank you for giving us the opportunity to ask questions, Mr. Chair.

And thank you for being here. The work that you do is crucial.

My first question is on the supplementary amounts for office accommodation. I feel it is a recurring problem. We can easily see that there are requests for additional funding year after year.

Since the plan is to reduce the number of public servants, why do you think the minister is still asking for $38 million? That's the figure in the second item on page 128. Is it a math problem or is it because we constantly underestimate the needs for office space?

[John McBain, Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services]

Thank you for the question.

This funding is a requirement expressed as a result of decisions taken by Treasury Board from October 14, 2010, until June 2011, so it reflects decisions that the government has made with regard to programs. In total there are 35 organizations where programs have been either expanded or renewed.

Of the $38 million, $37 million is for continuation of programs that currently exist. They are programs that had a specific period of funding set aside, and this funding will allow those programs to continue. We do not yet see coming to us, as a common service provider, reductions in accommodation requirements, although we clearly understand studying and making decisions on programs.

[Mathieu Ravignat, NDP, Pontiac, QC]

How do you explain the timing of those requests? It seems to me that a rather significant supplementary request is made every year.

[John McBain]

Certainly $38 million is considerable, but it does address 35 different organizations and their programs that were approved over the last year. We react to those approvals and what they require in accommodation.

[Mathieu Ravignat, NDP, Pontiac, QC]

We know that the government is paying millions of dollars to a private firm in order to cut the public service. We also know that the government is hiring fewer public servants and that the public service is shrinking to the point of losing its efficiency.

So what is the explanation for salary expenditures? Are those increases related to senior positions? Are they related to amounts paid out to subcontractors?

Can you expand on why we are seeing an increase in subcontracting? For example, in 2010-2011, Public Works and Government Services Canada saw an increase of $842 million in subcontracting.

[Alex Lakroni]

There is an explanation for the increase in subcontracting. But I would like to make a clarification. Under no circumstances does Public Works and Government Services Canada hire subcontractors at the expense of public servants. Subcontractors are hired either when there is a fixed project period or when specialized expertise is required.

[Mathieu Ravignat, NDP, Pontiac, QC]

But we still note an increase of 91.3%. I would like to know what the explanation is for the increase in contracting out work.

[Alex Lakroni]

A few factors come into play. First, as you know, we have been very involved in Canada’s Economic Action Plan. That is no longer underway now.

Another factor is inflation, which varies over the years.

There has also been a change in how we account for subcontracting. One part of Public Works and Government Services uses services from another part of the department. In the past, we used to calculate that as salaries. Today, for the sake of transparency, we count it as professional fees, although we use those services internally. Those services amount to about $200 million.

[The Chair, NDP, Pat Martin]

That is the end of your five minutes.

Next is Mike Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

Thank you for coming today. I appreciate the work you do. I have a couple of basic questions to help me to understand.

This year we had around $2.5 billion allocated in the main estimates. The supplementary estimates (B) say that authorities to date are $2.7 billion. When I look at supplementary estimates (A), I see that you actually aren't asking for anything, but you are asking under supplementary estimates (B).

How did we get from $2.5 billion to $2.7 billion without somebody giving you some money somewhere along the way? I don't understand where that extra money came from. Maybe you can explain that to me.

[Alex Lakroni]

Thank you for the question.

There are certain legitimate transfers that appear under Treasury Board Secretariat and are transferred to PWGSC--for example, termination benefits, maternity leave, and severance pay. That accounts for about $30 million. Another $30 million, $40 million is due to.... Just let me make sure here. So there is severance pay. There is a $30-million operating budget carried forward. Now I have the details.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

[Alex Lakroni]

Because, year over year, departments don't spend their full operating budgets, they are entitled to report the following year, up to 5%. Public Works' share this time is $30 million, which we had access to. That was reported from the previous year to this year.

[Mike Wallace, Conservative, Burlington, ON]

But where does that show up? For me, as a member of Parliament, I'm trying to find the balls around here, and the financial balls are very difficult to follow, to start with.

So I look at the main estimates. You're given $2.5 billion. I look at supplementary estimates (A) and there is nothing else, but then all of a sudden, under “Total Authorities to Date”, it says that you get $2.7 billion. If it's somewhere, just tell me where it is I can find that extra money, that $200 million or whatever it is.

[Alex Lakroni]

It is on page 20---

[Mike Wallace, Conservative, Burlington, ON]

Of which?

[Alex Lakroni]

--of the supplementary estimates (B). It is in the second column called “Permanent Allocations from TB Central Votes”.

[Mike Wallace, Conservative, Burlington, ON]

Page 20 of the main document?

[Alex Lakroni]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

Okay. I've got it.

I have to then go to page 20 to look at any transfers that happened in between the authorities that happened in supplementary estimates (A), (B), or (C). Is that correct?