Government Operations Committee on June 6th, 2012

[The Chair, NDP, Pat Martin]

Good afternoon, ladies and gentlemen.

Welcome to the 50th meeting of the Standing Committee on Government Operations and Estimates.

We are here to examine the supplementary estimates of the four agencies that report to this committee: the Privy Council, Public Works and Government Services, the Treasury Board, and Shared Services Canada.

Welcome to all the representatives.

I understand there's been some conversation among the four sets of witnesses. They would like to go in order of the Treasury Board Secretariat first, the Privy Council second, the Department of Public Works third, and Shared Services Canada fourth. Is that satisfactory to the witnesses?

We welcome Mr. Matthews and Christine Walker from the Treasury Board Secretariat.

Please begin with your opening statements.

[Christine Walker, Assistant Secretary and Chief Financial Officer, Corporate Services, Treasury Board Secretariat]

Thank you, Mr. Chair.

I am pleased to be here to discuss the supplementary estimates (A), 2012-2013, for the Treasury Board of Canada Secretariat. With me is Bill Matthews, Assistant Secretary, Expenditure Management, at the Treasury Board Secretariat. We are here to answer your questions on the supplementary estimates (A).

Bill Matthews will respond to any questions you may have on the government-wide supplementary estimates (A). I will address the estimates for the Treasury Board Secretariat. In addition, Mr. Matthews will address any questions on the central votes.

I would like to now focus on the highlights of the supplementary estimates (A) for the Treasury Board Secretariat.

The Treasury Board Secretariat is seeking total additional resources of $862.5 million; $850 million is related to funds required to cover the cost of paying out accumulated severance. As indicated in Budget 2011 and Budget 2012, the government is continuing to negotiate the elimination of the accumulation of severance for retirement and resignation, which includes allowing employees to cash out the severance that has already been accumulated.

To date, the accumulation of severance for voluntary departures has been eliminated for about 230,000 unionized and non-unionized federal government employees. This includes members of nine bargaining groups in the core public administration, members of the Royal Canadian Mounted Police, the Canadian Forces, all executives, and members of certain unrepresented groups in the core public administration. Eliminating the accumulation of severance benefits for voluntary departures is expected to provide permanent ongoing fiscal savings.

The Treasury Board Secretariat is also seeking $12.5 million for approved program expenditures. This includes $7.8 million for the modernization of human resources services in departments and agencies and $4.6 million to strengthen the security of federal systems against cyber-attacks.

The human resources modernization initiative will streamline, standardize, and consolidate human resources processes and systems for the Government of Canada. The funding for cyber-security will reinforce government information technology infrastructure and improve detection of and response to cyber threats in a digital world. This initiative constitutes prudent risk management in securing government systems against cyber threats that are continually evolving.

Mr. Chair, that concludes my remarks

[The Chair, NDP, Pat Martin]

Thank you.

Next is the Privy Council Office. Michelle Doucet and Mark Bélisle, please go ahead.

[Michelle Doucet, Assistant Deputy Minister, Corporate Services, Privy Council Office]

Thank you. Good afternoon, Mr. Chairman.

Good afternoon. I am pleased to meet with the members of the Standing Committee on Government Operations and Estimates. Today, I am accompanied by Marc Bélisle, Executive Director of the Finance and Corporate Planning Division for the Privy Council Office.

My introductory comments pertain to the 2012-2013 supplementary estimates (A) for the PCO. There is only one item in these estimates, and it is a reprofiling request in the amount of $1.3 million for the Commission of Inquiry into the Decline of Sockeye Salmon in the Fraser River from fiscal year 2011-2012 to 2012-2013.

As you may recall, the commission is led by Justice Bruce Cohen. In the last fiscal year, 2011-2012, the commission was granted money to carry out its mandate, which included the preparation of its report. That money was not used in its entirety, and, for this reason, there was a surplus at the end of the last fiscal year.

As mentioned when I last appeared before you, Commissioner Cohen was granted an extension to submit his final report. Specifically, rather than submitting it on June 30, 2012, he will submit it by September 30, 2012. This means that most of the preparation of his report will now be done in this fiscal year, and this includes costs for editing, translation, printing, and other costs related to the preparation of the report. It follows that forecasted costs for 2012-13 are now higher than anticipated, given that some of the work that was planned for the last fiscal year will now be done in this fiscal year. Therefore, the commissioner is asking for access to a portion of the commission's surplus from the last fiscal year, in the amount of $1.3 million, in order to fund expenditures that are now planned for 2012-13 and to allow him to complete his mandate.

The commission's total budget for 2012-13 is in the amount of $2.7 million, which includes the funding sought in the 2012-13 main estimates and these supplementary estimates (A). The commissioner has stated that he will complete the commission's mandate within its global budget of $26.4 million over four fiscal years.

On a different matter, I would like to take this opportunity, if I may, to correct the record on one item discussed before you on April 30, 2012, when we appeared on PCO's 2012-13 main estimates. At that time, we were asked about Shared Services Canada and if there would be a duplication of technical procedures in the management of e-mails, and therefore an increase in cost instead of a reduction.

In my response, I correctly explained that would not be the case, because not only does PCO deliver IT services in a cost-effective manner, but we were transferring responsibility for all e-mails to Shared Services Canada, except for top-secret communications. However, I later misspoke, and said that PCO will continue looking after e-mails in both the secret as well as the top secret categories. Therefore, I wish to correct the record by stating that the management of e-mail, data centres, and networks used in the processing and storage of information for all data at the secret level and below have been transferred to Shared Services Canada. PCO no longer manages secret communications. Services for top secret communications, for example, Foreign Affairs, and defence and security matters, are used by a restricted subset of PCO and are kept separate. These top secret communications have not been transferred to Shared Services Canada but will continue to be managed by PCO.

In closing, I would like to thank you for giving me a few minutes to inform you of the ongoing initiative in the 2012-2013 supplementary estimates (A).

We will be pleased to answer your questions.

[The Chair, NDP, Pat Martin]

Thank you very much, Ms. Doucet. That's very good.

Next we'll hear from the Department of Public Works and Government Services, Mr. Alex Lakroni and Pierre-Marc Mongeau.

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

Thank you, Mr. Chair and members of the committee.

I'm here today in my capacity as chief financial officer for Public Works and Government Services Canada. I'm joined by my colleague, Mr. Pierre-Marc Mongeau, the assistant deputy minister of the parliamentary precinct branch.

The department appeared before this committee on March 12, 2012, to discuss our main estimates for 2012-13. Today, we are pleased to discuss the supplementary estimates (A) for PWGSC, which were tabled on May 17, 2012.

As you know, PWGSC plays an important role in the daily operations of the Government of Canada. As the government's principal banker, accountant, central purchasing agent, linguistic authority and real property manager, PWGSC manages a diversified real estate portfolio that accommodates 269,000 federal employees in 1,819 locations across Canada, including the Parliament buildings.

PWGSC contributes more than $14 billion annually to the Canadian economy through government procurement. It prepares the annual Public Accounts of Canada and manages a cash flow of more than $2 trillion a year.

In addition, PWGSC translates more than one million pages of text on behalf of federal organizations and provides translation and interpretation services for Parliament and its committees.

These supplementary estimates (A) request $237.2 million for PWGSC in net new funding. Approval by Parliament will bring PWGSC's gross budget to $5.9 billion to be spent on the delivery of its mandate.

The department is heavily revenue-dependent, with 56% of our expenditures, or $3.3 billion, covered by revenue, primarily from client departments to support their programs. This brings PWGSC's net appropriation to $2.6 billion.

Let me take this opportunity to break down the PWGSC budgets. The department has an operating vote with a gross expenditure of $3.2 billion, which has two basic components. Number one, $0.9 billion is needed to deliver our core programs, such as central purchasing and banking, public accounts, payroll and pension services, and internal services. Number two, $2.3 billion is required to pay for rent and fit-up utilities for government-wide accommodation, Receiver General and central compensation, administration functions such as banking fees paid to financial institutions, and cheques, envelopes, and translation services to Parliament.

The department also delivers other services to departments on a full cost-recovery basis. It provides $2.1 billion of other services, such as real property project management, expert advice, and translation. PWGSC also has a capital vote of $497 million, primarily to invest in Government of Canada buildings and infrastructure.

Now that I have described the department's budget, let me turn to why we're here today. The first notable item in PWGSC supplementary estimates (A) is for the parliamentary precinct program. PWGSC is asking for $242.9 million for the rehabilitation of the parliamentary precinct buildings. This covers the funding for projects such as the West Block rehabilitation, the Wellington Building, the recapitalization program, as well as lease costs for interim relocation. These are major projects that have already been approved and are part of the long-term vision and plan for the Hill.

The total expenditure forecasted for fiscal year 2012-13 to rehabilitate the buildings of the parliamentary precinct is $247.6 million. The difference of $4.7 million was approved in the main estimates.

As you know, the spending for this program is project-driven, and project requirements have to be defined and approved by Treasury Board. Given the magnitude and complexity of these projects, coupled with the timing of approvals, PWGSC is now including the amount of $242.9 million in supplementary estimates (A).

I am pleased to share with you that the Auditor General's 2010 report recognized PWGSC's strong results in project management and project delivery. My colleague, Mr. Mongeau, is prepared to provide you today, should the committee wish, with an overview of the program and its performance to date.

The second item is the $9-million transfer from PWGSC to Shared Services Canada relating to activities within that new department's mandate. This current year adjustment related to two projects is over and above the permanent transfer of $113.3 million included in the main estimates.

Finally, PWGSC is receiving close to $4 million from other government departments in order to carry out the consolidation of pay services in Miramichi, New Brunswick.

These three items constitute PWGSC's request in supplementary estimates (A).

My colleague Mr. Mongeau and I would now be pleased to take your questions. Thank you.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Lakroni. That's very good.

Finally, we have Benoît Long and Gina Rallis from Shared Services Canada, please.

[Gina Rallis, Senior Assistant Deputy Minister and Chief Financial Officer, Corporate Services, Shared Services Canada]

Thank you very much.

Shared Services Canada was created on August 4, 2011, with a mandate to streamline and reduce duplication in Government of Canada information technology infrastructure services in order to modernize the way we deliver services to Canadians and to improve the security of federal IT infrastructure. SSC has a very focused mandate to modernize services in the areas of e-mail, data centres, and networks.

Since April 1, 2012, Shared Services Canada has been a stand-alone organization. It is part of the core public service, with the Treasury Board as its employer.

Shared Services Canada's report on plans and priorities was published in May of 2012. For 2012-13, SSC has four priorities: first, maintain and improve the delivery of IT infrastructure services to the Government of Canada through an enterprise approach; second, launch the renewal of the Government of Canada's IT infrastructure, identify an e-mail solution, and develop initial plans to consolidate data centres in networks in a whole-of-government approach; third, establish government mechanisms and implement partnerships to clarify accountability and adopt enterprise approaches for the management of IT infrastructure services; fourth, implement efficient and effective business management processes and services in support of the SSC mandate.

Supplementary estimates (A) represent an increase of $32.4 million in the department's reference levels: $21.7 million for operating expenditures and $10.7 million for capital expenditures.

The approval of supplementary estimates (A) will result in a small increase in ministerial authorities. They will go from $1.474 billion to $1.507 billion—a 2.2% increase.

The total increase of $32.4 million is principally attributed to $21.6 million in transfers from other government departments in support of the creation of SSC and its mandate—this is not new funding—and $10.8 million to reflect new funding approvals in support of the implementation of Canada's cyber security-strategy, which fulfills a commitment in the Speech from the Throne and Budget 2010.

I would now be pleased to answer any of your questions.

[The Chair, NDP, Pat Martin]

Thank you, Ms. Rallis, and thank you to all of the witnesses for their brevity. That gives more time for us to grill you with questions.

We'll begin with the official opposition, the NDP, Monsieur Denis Blanchette, for five minute please.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you, Mr. Chair.

I want to thank all our guests. It is a pleasure to see you again.

Over 50% of supplementary estimates (A) requests come from organizations before us today. The main request comes from the Treasury Board—$850 million for severance pay. In Budget 2012, very significant amounts had already been allocated.

I would like you to give me a single figure. How much of the $850 million you requested accounts for severance pay?

[Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat]

Thank you for your question.

The money we're speaking about here in terms of severance is not related to departures. As the chief financial officer for the Treasury Board Secretariat said in her opening remarks, this relates to the elimination of accumulation of severance for voluntary departures.

What we're speaking about here is...if you go back under the existing collective agreements, employees accumulated severance benefits that they earned and then were eligible to receive when they retired or departed voluntarily. That practice of accumulating those benefits is now stopping.

What we do have is a benefit that the employees have earned up to this point under their existing or old collective agreements. The total liability for that amount the employees have earned up until about March 2011 is roughly $6 billion, and that's already on the books as a liability. When you look at the $850 million that's being requested for severance, and you would have seen a similar amount—slightly higher last year—of $1.3 billion, if I recall correctly, that is an estimate of the cash that will be paid out to employees who no longer accumulate that severance but do have the right to receive the payment for the benefits they've earned.

As that severance benefit ceases to be accumulated—new agreements are negotiated—employees are given a choice. They can take the cash for the severance benefits they've earned up to date now or they can defer it until they leave. There's also an option to have some now and some later, but let's keep it simple for today's purposes.

What we're trying to do this year, again, is estimate how much cash will be paid out for that earned benefit. Last year we asked for $1.3 billion, based on our estimate, and our estimate was about 75% of those employees who were eligible would ask for a cash-out. In fact, the estimate was not too bad. It was roughly 73%, $1.1. billion, so we were not too far off in our estimate. This year we're estimating that we will need $850 million for the same reason.

That number will vary depending upon two things, one being the number of agreements that get negotiated. It was mentioned in the opening remarks that there are now...I believe it was nine agreements that have been successfully negotiated where the benefit has been eliminated and there is no longer accumulation of severance. There are some 27 agreements that the Treasury Board is actually responsible for. New agreements will be negotiated. Depending upon the pace of those negotiations, how quickly the payment options are put in place and the choices the employees make, we then are left with an amount we have to estimate. It is an estimate, and at the current moment it's an estimate of $850 million. It has nothing to do with the departures you were asking about.

[Denis Blanchette, NDP, Louis-Hébert, QC]

I want to come back to my original question. You did some simple mathematical calculations to arrive at that amount. You had an estimate you multiplied by a certain number of employees, and you came up with the amount you are requesting today.

Here is my question. How many employees are affected by that?

[Bill Matthews]

What you have in the core federal public service is roughly 278,000. If you add in the RCMP and National Defence on top of that, you get grosso modo about 400,000. Many of the agreements have already been negotiated, so we again are dealing with an estimate, but it's roughly based on those numbers. As I said, though, it is an estimate because we are projecting about how many agreements will be negotiated over the balance of the year. It's based on the entire population of the public service, RCMP, and National Defence.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Does that include the amounts allocated to people who will leave voluntarily this year and next year as part of the federal government's efforts to reduce its staff?

[Bill Matthews]

If people leave voluntarily, if the agreement has already been renegotiated, they may have already opted to receive part of that payment. If they have not received that payment, when they depart next year or the year after they will then get that amount, yes. Some people may have already taken it last year.

[The Chair, NDP, Pat Martin]

I'm afraid that concludes your time, Denis. Thank you.

For the Conservatives, Mr. Jacques Gourde, for five minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses for joining us today.

My first question is for the Public Works and Government Services Canada representatives. Could you tell us more about the restoration of the Parliament buildings on the Hill? We know that you have requested $242 million, but I would like to know where that money is going.

[Pierre-Marc Mongeau, Assistant Deputy Minister, Parliamentary Precinct Branch, Department of Public Works and Government Services]

Thank you for your question.

I will quickly give you the breakdown of the money we have requested this year.

First, $30 million will be earmarked for leases, which we have to pay annually. Based on what we call the recapitalization program, smaller projects come under Public Works, so that we don't have to go through the Treasury Board. Those smaller projects we carry out enable us to move ahead more quickly in awarding major contracts. As you can see, a portion of the East Block is covered because masonry work is being done and part of the roof is being rebuilt. By doing that, we are accelerating the overall project we will have to carry out in a few years. That is what we call recapitalization, for which $61 million will be earmarked.

Some renovation and rehabilitation work is being done on the West Block, with which you are all familiar. We will set aside about $60 million for that building's renovation. That will basically allow us to finish the interior demolition and remove dangerous materials. Work is ongoing and is being completed; this first part should be finished over the summer.

We also have to pay the consultants and the contractor. A construction manager is on site and helps us better plan the work. All of those ongoing projects are meeting the deadlines and staying within the budget.

There is also the Sir John A. Macdonald Building, which was just renamed. It was previously called the Bank of Montreal Building. The construction work has already begun. We have already received the money to begin that project. We are also renovating the building at 180 Wellington Street, on the corner of O'Connor Street. Intense construction work is being done on that building. We are carrying out the interior demolition and must make sure to do seismic reinforcement work. We also have to demolish most of the building. The first part of that demolition should be completed in August, and the second part, which will begin soon, has to do with interior renovation. We will rebuild the slabs we demolished in order to be able to set up committee rooms and member or senator offices. We are currently delimiting that.

So here are the main elements: the leases, the recapitalization program, the West Block, the Sir John A. Macdonald Building and, finally, the building at 180 Wellington Street. All those currently ongoing projects will help us stick to our schedule. Once again, we are staying within the budget the Treasury Board has allocated us for those projects.

[The Chair, NDP, Pat Martin]

One minute, Jacques.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

I can risk asking my question, and you will continue. Are all those amounts in line with the projected budgets? Does the construction itself also meet the projected deadlines? Often, those two things go hand in hand. When deadlines are extended, there are additional costs, but when they are met, things usually go well.

[Pierre-Marc Mongeau]

Actually, we are moving faster than expected. Take for example the building at 1 Wellington Street. There are currently four committees for that building. It has taken us a year to do that. This helped us change the strategy for the West Block. Our original intention was to do the work in two stages, with the south wing first and the north wing second. The fact that the construction has been going faster has allowed us to free up the whole building. Actually, we finished three years ahead of schedule. That enables us to move much faster. We are currently looking into solutions that will help us reduce not only the costs, but also—and more importantly—the time frames.

We are staying within all the budgets the Treasury Board has allocated us.

[The Chair, NDP, Pat Martin]

Perfect timing, Jacques.

Next is Monsieur Alain Giguère.

Alain, five minutes, please.

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

Thank you very much.

According to your capital budget, $61 million is set aside for the East Block and $60 million for the West Block, but there is no mention of the John A. Macdonald Building. The amount for the building at 180 Wellington Street is also not indicated.

[Pierre-Marc Mongeau]

Sorry, Mr. Chair, I wanted to talk about all four together. So we are talking about $30 million for leases, $61 million for the recapitalization program, about $60 million for the West Block, about $30 million for the Sir John A. Macdonald Building—formerly the Bank of Montreal Building—and $61 million for the Wellington Building.

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

That comes up to about $240 million.

You are talking about $90 million for the Wellington Building. Are you meeting the deadlines?