Public Accounts Committee on Dec. 14th, 2011

[RAdm Andrew Smith]

In light of what we have learned since, I am not sure that today we would have acted the same way.

I would say that in keeping with standard project management practices and principles, we would have had a single senior-level official, at least at the assistant deputy minister level, in charge of the project, and equally a master implementation plan in place.

That, regrettably, was not the case when the project was established. That is noted. That is what it is; we can't change that. The focus has been to address the backlog, moving forward in as aggressive and positive a fashion as possible. I would submit that the measures we put in place are in line with that. The risks at the time of implementation were understood. The question remains as to whether we would have been better off to wait or better off to implement it.

Ultimately, based upon what we have learned to date, we were better off to implement it, though we acknowledge there are challenges associated with that. Had we waited, first of all, we would have had a more serious backlog than we have now. Second—and this is an important point—if we had waited for implementation, people who retired in the intervening year or two or three years prior to implementation would have been precluded from applying for the plan. We would have precluded some people's access to a pension.

On balance, I would submit that we made the right decision to proceed, acknowledging the challenges, to get as many people, if I could use the term, under the tent as possible early on.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Thank you.

During your speech, you mentioned some measures you had adopted to resolve these problems. But you also mentioned some problems that were raised in the auditor general's report and that are causing delays: paper files, computer systems, and so on.

I would like to get back to my colleague's question. The report shows that you set an objective of 1,550 files by March 31, 2012. We know that in some cases, it can taken up to seven years for reservists to see their pension.

Can you tell us more about the measures you will take to achieve these objectives and also to resolve this problem in the long term?

[RAdm Andrew Smith]

As I mentioned earlier, we are continually examining how we can process files more quickly and make our current administration system more efficient. We will continue to assess whether we can hire more staff to help us, something we regularly do to reduce wait times.

It's always possible to bring the seven years back to something along the lines of six years or five years. It takes more staff and there is a cost associated with that, but that remains something we continue to examine.

[The Chair, NDP, David Christopherson]

Your time has expired.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Thank you.

[The Chair, NDP, David Christopherson]

Thank you, both.

Mr. Shipley, you have the floor, sir.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you, witnesses.

The Auditor General completed the report on November 30, 2010. I'm not sure when it started or whether that's important. So we've gone now a year since the report was completed.

A number of the things that I want to click onto here, I guess, are telling us we know what's in the report. I'm more interested now and, quite honestly, Mr. Donaldson, I want to say thank you, and I'd hope you would pass that on to the reservists. I'm learning more about their function, their appreciation, and our appreciation as Canadians for what they themselves offer to Canadians. And I want to say thank you to you and, through you, to them for that.

I'll come back to what's happened in that year.

Can I go to a basic question? Can you help me? If there is a reservist who has left education--university or college--or one who is employed but who volunteers now to become part...can you just explain quickly how that works with an employer and how that works with their education? Can they continue while they're reservists with National Defence?

[VAdm Bruce Donaldson]

Mr. Chairman, if I may, I'll answer that.

So, sir, your question is essentially how do the reserves work.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

That's it, quickly.

[VAdm Bruce Donaldson]

Very quickly, we have reserve units across the country, and when people are recruited into the reserves, they join a unit. Quite often those who initially join the reserves are in school and are attracted by the excitement and the opportunity to earn money. They're assigned to a unit. They undergo a specific training regime until they are qualified, but the training continues throughout their entire service. They go into part-time service of between one and two nights a week, about one weekend a month, and for a period over the summer, depending on their availability, of between three weeks and three months.

When they leave school or go back into employment, they continue one or two nights a week. Typically as they get more senior, it will be two nights a week with their unit, and they will find time away from their work for summer training for about two to three weeks typically. We have been working with employers across the country to help them recognize the requirements for reservists to train and, therefore, to encourage them to give time away from work. We also highlight the benefits of reserve service to employers across the country. And throughout all this period when reservists are on full-time service, they're accumulating time towards a pension plan so that regardless of their other possible instruments on retirement, at the end of a career in the reserves, they would be entitled, after qualifying periods of service, to a pension.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I would think most Canadians would be surprised to know that there are 27,000 primary reserve members and that 15,000 of those are actually full-time. I guess that helps allude to my earlier comments about the appreciation we have across the country for them.

The second question I have, and this may be for Mr. Smith, is about the backlogs. You're now at 230 employees. To continue to work towards eliminating these backlogs.... I'm always concerned quite honestly when we continually add people to deal with things when I can know that the backlog will come to an end, and we will have hired all these people. Now we have a modernized system and most things will be done electronically. When do you see an end to that coming? Or are you concerned or saying that these employees once there will always need to be there to maintain the system?

[VAdm Bruce Donaldson]

Mr. Chair, if I may, I'll just kick off the answer.

Mr. Shipley, at its peak we had 15,000 reservists on full-time service. That was during the Olympics, Afghanistan, and the G-8 and G-20 timeframe. Typically we have between 8,000 and 9,000 on full-time service. It spikes at different times of the year, with the summer training that I was talking about. We're in the process now of reducing the number of reservists on full-time service as we move forward.

I'm sorry for the interruption.

[RAdm Andrew Smith]

Thank you for your question.

Currently based on the 230 people we have in place, as I said, the number of hours per file has gone from 150 down to 100. As we automate more records as opposed to the 1960 paper or manual processes, I fully anticipate that this number is going to come down to 80 hours and then 50 hours. So processing time is certainly going to speed up.

The 230 people we have in place to address this will not be required in the longer term for the pension buybacks. Therefore, going forward, if we were to bring more people in to address the backlog, I submit they would be hired in a term capacity, so that we would have the equivalent of a temporary surge capacity without incurring long-term liabilities, if we didn't then need them going forward.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay.

[The Chair, NDP, David Christopherson]

You're all done.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

[The Chair, NDP, David Christopherson]

Thank you.

Mr. Byrne, you have the floor, sir.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thanks, Mr. Chair.

Thank you, gentlemen, for appearing before us. You gave us a very positive and helpful insight into the nature of the reservists.

You indicated that of the 12,000 outstanding applications, 83% of the 12,000 applicants are active duty reservists, active in a reserve at the moment. That gives us a window as to the age cohort of the applicants.

Twelve years ago, we went to an electronic records system. Of the 12,000 applicants, how many of those applications would involve records that have to be assembled through evidence?

[Dave Grandmaison]

Could you repeat that, please?

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

How many of the 12,000 applications currently before you would represent applications that involve records that have to be assembled through evidence, as mentioned in the preamble?

[Dave Grandmaison]

As the admiral said, there are roughly 9,000 files of still-serving members that haven't really been moved along. Those people would have records that are more automated than those of the retirees, but because there were no automated records prior to 1999, there are, for sure, still paper files for those years. As we move further away from 1999, more years become automated.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

My question, Mr. Grandmaison, is this: how many are there?

[Dave Grandmaison]

We are unable to estimate exactly. In the 9,000 sitting there, for sure every one of them has some non-automated records.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

On the issue of the lack of a financial statement for the reserve force pension plan that the Auditor General could effectively audit in previous years, the only window that parliamentarians have on the financial status or the financial statements comes from the public accounts. In the Public Accounts of Canada in 2006-07, the year that the reserve force pension fund account was established, there were contributions collectively from personnel and government of $4.8 million, but administrative expenses of $1.5 million. That one and a half million dollars is about a third of the overall cost of the contributions.

For the reserve force in 2007-08, on the $66 million in contributions that year, there were an undisclosed amount of administrative expenses--presumed to be zero--and pension transfer value payments of $4.5 million. However, in 2008-09, the entire value of what was described in the previous public accounts as being pension transfer value payments became administrative expenses.

Exactly $4,567,078 million was the figure used, which then became administrative expenses that year--from the previous year--and then for that current year, approximately $4.5 million was booked as administrative expenses on $88 million in actual receipts. Then, in 2009-10, $5.3 million was booked on $95 million in receipts. In 2010, $5.2 million was booked as administrative expenses on $65 million in receipts. When you look at it comparatively, for example, on the same page that they appear in the public accounts, the Royal Canadian Mounted Police superannuation account, with $13 billion, had listed administrative expenses of $8.6 million.

Do you feel that's a reasonable representation of administrative expenses for those levels of receipts or contributions from the government and reservists? It would be my take that these administrative expenses are fairly high as a ratio of contributions, especially considering the fact that almost all funds are transferred to the pension investment board. They're not handled internally; there is simply a transfer to the pension investment board.

Would you be able to comment on whether or not reservists are getting good value from the administrative expenses?

[Kevin Lindsey, Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence]

Mr. Chair, with respect to the figures, I can't comment on the RCMP data. I would say that the administrative expenses associated with the reserve force pension plan are in fact a function of the remedial efforts we're making to process this backlog. And when the plan reaches a steady state, when the records are automated, when the reservists are fully into the kind of pension system the RCMP are now—which we're targeting, I believe, to happen by 2015—then you will see this ratio change significantly.

I would just note, Mr. Chair, that while the contribution figures from plan members in the government are, as the member stated, pretty close, they do exclude the investment income from the Public Sector Pension Investment Board. That income was about $32 million in 2010 and about $39 million in 2011. So the ratio admittedly is not what we would want, but it is slightly better than the figures you cited would infer, simply because they didn't include the investment income.