National Defence Committee on June 1st, 2009

[Sheila Fraser]

Yes, that is operations money.

[Denis Coderre, Liberal, Bourassa, QC]

It is for operations. One of the people in charge said in the Senate that it was not capital money, but operations money.

How do you explain that there is a crying need in the services area? That money could have been used for equipment, or for services, in the true sense of the term. The military has specific needs because of its specific realities.

For everyone’s benefit, how do you explain, in concrete terms, the fact that they were not able to fill in the documents and provide enough information that would allow the money to be used, when we have the minister coming to us and saying that he needs extra money, specifically for operations?

[Sheila Fraser]

One of the difficulties in the Department of National Defence is that the entire budget is allotted to the department as a whole for a series of programs and activities.

In the public sector world, it is very important never to blow your budget. Everyone shows a surplus. When you add up surpluses in a range of areas, you sometimes see that people perhaps thought that they would have expenses, but did not make them before year-end for various reasons.

So you need a little more strategic view of it all to be able to see that, in the bigger picture, a lot of people were not spending their money. You need better information in order to see that with enough lead time.

[Denis Coderre, Liberal, Bourassa, QC]

Ms. Fraser, it is a concern if, exactly as you say, they knew, in February 2008, that they were going to have $103 million left over; they should set about correcting that. In April 2008, the amount was $268 million. After that, the surplus went over $500 million. Someone was not doing their job.

Who was responsible for that situation, the present Chief of the Defence staff, who was the Vice-Chief of the Defence Staff at the time?

You usually like to say that someone is responsible. Who was responsible in this case?

[Sheila Fraser]

The problem is that the people in various operational sectors did not declare their surpluses far enough in advance.

Is that because they were not on top of the situation or because they wanted to keep some money in reserve? You would have to ask that question to the representatives from the department.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you.

[The Chair, Conservative, Maxime Bernier]

Thank you, Mr. Coderre.

Mr. Boughen now, for five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair.

Allow me to extend my welcome to our guests.

As I read through the report, Ms. Fraser, I was wondering how you are recommending a design that is different from what is currently in place. It seems to me we don't have a CFO, so that may be the top block. Then, do you see two arms coming off from that--operational and capital on one side, and likewise operational and capital on the other side? Would it be one onshore, one offshore?

Perhaps you could help us kind of understand, in a diametrical kind of fashion, how you see the changes that will help the whole operation become much smoother.

[Sheila Fraser]

Certainly we think that naming a CFO is important, and that has been done. As well, there is a finance committee that has been established.

I really don't see separating it out more, because I think one of the issues we're trying to get at here is that there needs to be much better integration and more of a corporate business plan. There's a lot of planning down at the operational level; it just needs to be pulled together.

The other thing is that I think the department has started many of the things that we would expect to see in place. For example, there are the risk strategies or the capability modelling. It just hasn't completed it. So it needs to get on with doing that. I think, basically, senior management has to pay more attention to financial management and the risk, and to some of these perhaps more sophisticated management tools. Hopefully by establishing this new finance committee they will be able to do that.

[Ray Boughen, Conservative, Palliser, SK]

Do you see more of the military in that operation, or more civilians, or have you any thought as to how that might be staffed?

[Sheila Fraser]

The issue that we raised here was of course around the fact that the department didn't comply with the Treasury Board policy on financial management. As I've said kind of bluntly, it was to perhaps re-establish responsibility on the civilian side. A lot of the responsibility had moved to the military side of the place. Now with the CFO and the deputy minister with a clear accounting officer responsibility, we'll have to see how this all plays out over time. Does naming people actually change anything in the department? But I think we would see a bit of a rebalancing more toward the civilian side.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.

Thank you, Chair.

[The Chair, Conservative, Maxime Bernier]

Yes, two minutes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

We're talking percentages, and $300 million is a large amount of money. It also represents 1.6% of the budget. You may not know this, but it goes back to Mr. Coderre's comments to try to put some context to this. Do you have any idea how many different components or different departments share in that $300 million? Is it 10, 20...?

[Sheila Fraser]

I'll ask Ms. MacMillan to respond.

[Dale MacMillan, Principal, Office of the Auditor General of Canada]

Basically, that is a conglomerate of everybody's budgets, all the individual services. Obviously, the ones with the higher budgets are the ones that are going to be running the larger surpluses. It tends to be the army, navy, and the air force. Those are the ones with the larger budgets.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

You know, $300 million sounds worse than 1.6%. Again, with your experience from other departments, is 1.6% high or low?

[Sheila Fraser]

Well I must admit, I have a lot of sympathy for the department having to manage to $200 million, which is 1% of their budget. It is very difficult to do that, to not go over. In the world we're in you cannot spend a dollar more than the amounts that have been voted to you. So to manage within 1% in such a large, complex department I think is a real challenge.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Would they be in more trouble if they overspent by 0.1% than if they underspent by 1.6%?

[Sheila Fraser]

Absolutely.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I'll save another one for some other time.

[The Chair, Conservative, Maxime Bernier]

Okay, thank you.

Mr. Bachand.

[Claude Bachand, Bloc, Saint-Jean, QC]

Thank you, Mr. Chair.

Ms. Fraser, the Bloc Québécois has always felt that, in terms of equipment purchases, the cart was being put before the horse, as they say. Since 2006, the government has announced a series of major procurements that do not reflect our view. We have been asking for a defence policy, developed as the result of a foreign affairs policy, since national defence is often the result of the approach to foreign affairs. Normally, with the foreign affairs policy set, and the defence policy set, the next step is a capability plan, the things that are possible. That is where we ask ourselves what we want to buy so that we can conform to the new foreign affairs policy and the new defence policy.

Do you agree that the government has gone about things backwards? It made purchases, it announced that it was going to, and the “Canada First“ strategy was announced right afterwards. Is that not a major strategic error? What do you think?

[Sheila Fraser]

Certainly, we would like to see a link between operational plans, the corporate strategy, if I may call it that, and the national defence strategy. I feel that that would be ideal. That is what we would like to see, and clearly, that is our recommendation. The recommendation, in fact, is that there should be a plan at departmental and corporate levels to link the two.

We did not look at the reasons behind the procurements—perhaps that is something that is clear now—but there were plans before. I think elements of the Canada First strategy existed before it was officially brought together into one whole.

Perhaps also there were needs that clearly had to be met, because, even in our audits, we saw equipment that was at the end of its useful life and that needed to be replaced.

Yes, in the future, we would like to see a more direct link that could be traced from the strategy to the operational plan over a longer term.

[Claude Bachand, Bloc, Saint-Jean, QC]

So, from your position, you have a hard time saying that it was not right, that we should have had a foreign affairs policy, a defence policy and a procurement plan. You cannot tell me that the way in which things were done was improper.