Public Accounts Committee on Dec. 14th, 2011

[The Chair, NDP, David Christopherson]

Okay, I'm sorry, but the time has expired.

Moving along to Mr. Hayes, you have the floor, sir.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair, and welcome to our guests.

To the Assistant Auditor General, the 2007-08 and 2008-09 statements had a denial of opinion. I just want to understand clearly why that occurred. If I'm reading this correctly, it's because of the inability to estimate the accrued pension liability and contributions receivable.

Is that a correct statement?

[Jerome Berthelette]

Mr. Chair, that's correct.

I would also add the following points, though. The financial audit found deficiencies in the internal controls, both manual and automated, over transactions. There was a lack of data. There were high error rates, inappropriate segregation of accounting processes, and a lack of quality assurance for financial statements. This contributed to the denial of opinion.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

It's been stated that National Defence requested that a financial audit not occur in 2009-10 and 2010-11 to allow it time to address the backlog of pension buybacks, which I am again assuming are used to calculate the accrued pension liability.

My question to you, sir, is do you feel that DND will be in a position in 2011-12 of having that accurate information? That same question goes to Mr. Smith as well.

[Jerome Berthelette]

Mr. Chair, I would defer to the CMP.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Fair enough.

[RAdm Andrew Smith]

In going through the financial audit, we worked very closely with the Office of the Auditor General, and that very issue came up. We had a very engaging discussion back and forth on whether things would change with respect to the pension buyback in a material way to make it worth a significant investment of time by the Auditor General's office to go through the statements again. The conclusion mutual conclusion we reached was that it would be unlikely for 2009-10, and certainly for 2010-11.

It was initially envisioned that we would re-institute that financial audit process in the fiscal year 2011-12 timeframe. Recent discussions with Ms. Cheng from the Auditor General's office, who was the lead on that, indicate that from her perspective it would be highly preferable to have 50% of that backlog addressed so they can have a higher level of confidence in the financial statements. Based on that, the current assessment is that it's more likely to merit the resources and time of the Auditor General's office in fiscal year 2013-14, based on the current processing times and the anticipated progress being made.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

So in all likelihood then, if the statements are audited in 2011-12, we would anticipate having another denial of opinion. Therefore, the preference and the understanding is that it will take an additional year—

[RAdm Andrew Smith]

Yes, an additional year or two to get to a point where there really is a material change.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

I just want to be clear that we all understand that.

I have one further question to you, sir. You have taken on the lead role in this. The initial report did suggest that there were some areas of concern in the fact that responsibilities were divided between three individuals, the chief of military personnel, the assistant deputy minister of finance, and corporate services. I would expect there would still need to be communication between all of those parties. Is that correct? Are you the sole go-to person, or are you the coordinator and facilitator?

[RAdm Andrew Smith]

I have one small correction to make, if I could, upfront. You said three people, but you really only named two. The assistant deputy minister of finance and corporate services is one individual, Mr. Lindsey to my immediate left. The assistant deputy minister for information management is that third individual. He has a role to play in this as well.

The policy and the service delivery components now come under me, and so I have the responsibility of coordinating both, working closely with, as required, both of my counterparts in the finance and corporate services world and with IM on the systems improvement side, to bring issues and resources to bear to address the concerns that might be in play. But there's clearly one dog to kick, and that's me.

[The Chair, NDP, David Christopherson]

You're right on time.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair.

[The Chair, NDP, David Christopherson]

Very good.

Moving along to Mr. Allen. You have the floor, sir.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thank you to everyone for being with us today.

Let me just say upfront that we certainly appreciate the fact that we've entered into this, no matter what the complexities, the heartache, headaches, and aches elsewhere that occur when the buck stops or the dog gets kicked—and hopefully not too often.

As my friend, Mr. Kramp, said in thanking you on behalf of his unit in his neck of the woods, I'm from Welland and so the Lincs and Winks are obviously very grateful as well. I send along their thanks for this, albeit some of them still have some issues about what this is, but they're one of many obviously.

So as part of this process that you're trying to get through, communication is a key ingredient because quite often you're right in what you said about the numbers. There's no question that you're wholly accurate about who's ready to retire and who needs to know now, and I'm glad to see you pulled that piece out and said, let's go do that first. It is about saying to all those folks, “We hear what you're saying and we're trying to answer your questions.” How far along are you in that, because some issues raised by the Auditor General's report clearly say that communications just really weren't good?

I know you talked already about two websites eventually collapsing into one, albeit it sounds like they might still be there. So, Rear Admiral, could I get you to start with that.

[RAdm Andrew Smith]

Certainly.

The two websites will be combined into one by March 2012. The communications process related to reservists is in itself a challenging piece, particularly for part-time reservists. Sometimes they parade, sometimes they don't, sometimes they move, and then it might take them a while to re-engage in another unit. It's unlike the regular force, with whom we have a greater ability to communicate.

So getting the message out to reserve force units does present a challenge, which is why we've elected to do the town halls and have started up the working group that I referred to, in order to try to get that word out to reservists. And it's why we continue to dedicate nine people to a call centre to allow people to call in and have a face-to-face discussion related to their particular case during business hours.

[Malcolm Allen, NDP, Welland, ON]

You talked earlier about how you'd split a certain number of cases off, and I think you actually said there were about 800 files worked on or ready to be worked on. Are they in queue? Do you simply take one and follow it through until it's done, then pick up another one? Or do we pick bits and pieces depending on...?

Let's assume I was in the Lincs and Winks with my colleague, Matthew Dubé, and we both basically started around the same time. We might have attended the summer program, for instance, and then joined the reserves. Because both of us are asking the same questions at the same time, does it become an A versus a D thing, or how do you pick that up?

[RAdm Andrew Smith]

I will give you a partial answer and I'll ask Mr. Grandmaison to elaborate momentarily.

Of the 871 files that remain outstanding for people who are retired or retiring, they could be in a first, second, or final audit phase. With some of them, we have to go to the Canada Revenue Agency for a liaison function. There's a final audit process in play, and so they can be in the various stages of pension administration.

With respect to the triaging in place--you versus Mr. Dubé, for example--I'll ask Mr. Grandmaison to elaborate on how those are actually prioritized.

[Dave Grandmaison]

The files are currently processed in four priorities. Obviously, death or injury in theatre is number one, and retirement is priority number two. Those retiring are number three, and those still serving are number four.

As the admiral said, there are 871 files that my staff are currently in the process of working on. As it takes 100 hours of actual processing time to work on a file, you can see that they are working on many files at once.

We do have to go to the Canada Revenue Agency to make sure that the people have room in their RRSPs to transfer files. Usually we wait up to two weeks to get the response back from CRA on that. After that, we have to go to the member and they have to give us a cheque. If it's a big cheque, it's often anywhere from two to six weeks before that big cheque arrives.

So my staff isn't there waiting for the mail to arrive. They quickly grab another file, always working on number ones first. When they've done all the number ones they have, they work on the number twos, etc. They are more than gainfully employed.

As the CMP had said, we are looking at the feasibility of hiring an additional team of 50 term employees to make the backlog go away more quickly. I have a lot of files that can be processed, and we are doing the best we can with what we have.

[The Chair, NDP, David Christopherson]

That's the time we have, but Vice-Admiral, I saw that you were trying to get in.

I can't get you both in, but if you'd take a quick moment, Vice-Admiral, go ahead.

[VAdm Bruce Donaldson]

I just wanted to come back to the first question and say that with each of these 12,000 files or 8,000 files, there really are quite different circumstances, with each of them needing a good deal of investigation.

There are 12,000 people who want to know the status of their file, how long will it take, and when they will get an answer, etc., so the communications challenge is huge. But we get that. We're doing the best we can to resolve that by putting out as much information as we can and by giving people the opportunity to call, with a volume that we can manage, while trying to stay ahead of it.

But we recognize that it's tough for the people who aren't getting the answers they need. It will be difficult for us to fix that in the short term. We'll just continue trying to do the best we can to get the work out.

[The Chair, NDP, David Christopherson]

Thank you.

Mr. Aspin, you have the floor, sir.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

Welcome, gentlemen.

I personally regard this--and I guess it's been noted--as a really good news story. It's a real challenge, the reserve force pension plan. As Rear-Admiral Smith alluded to, he'd probably do it in a little different way, but as you know, we don't always know where to go when we're first attempting something. As my colleague Daryl Kramp often says, we're in progress here--we're in solid progress--but we're not in perfection.

I have a couple of questions. There are numerous references to what is referred to as “pension modernization” throughout the chapter. Could you perhaps explain to the committee what is meant by pension modernization?

[RAdm Andrew Smith]

I'll ask Mr. Grandmaison, who is also the director of the pension renewal project, to address that specific question.

[Dave Grandmaison]

We're currently in the approval process to join the rest of the federal government of Canada, Public Works, and the RCMP with a modern pension solution that has self-service capability, in order to increase service to the members and to fill in the missing automated pieces that we currently don't have.

The approval stage is rolling along. It's actually scheduled to go before the board tomorrow. Because it's not approved as of yet, I can't get into too many details, but it will allow the CF members to have the same level of services that public servants, like me and RCMP members, currently have or will have.