Public Accounts Committee on March 22nd, 2016

[The Chair, Conservative, Kevin Sorenson]

Good morning, everyone.

It's Tuesday, March 22, 2016, and this is meeting number six of the Standing Committee on Public Accounts.

I will mention to our committee this morning that we are televised, so I would encourage you to put your cellphones on vibrate or silence them or shut them off as a courtesy to those who are speaking and to those who are presenting here today.

Today, we are, as you know, considering chapter 5, “Canadian Armed Forces Housing”, of the fall 2015 report of the Auditor General of Canada.

Appearing before us today, we're pleased to have the Auditor General of Canada, Mr. Michael Ferguson. From the Office of the Auditor General, we also have Mr. Gordon Stock, principal. From the Department of National Defence, we have Bill Jones, senior associate deputy minister, and Jaime Pitfield, assistant deputy minister of infrastructure and environment. Also with us is Dominique Francoeur, chief executive officer, Canadian Forces Housing Agency, and Major-General Derek Joyce, deputy commander of military personnel command.

We have two opening statements this morning before we turn to questions from our committee. I would invite the Auditor General, who typically appears here as we do these studies, to give us his presentation.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Mr. Chair, thank you for this opportunity to discuss chapter 5, “Canadian Armed Forces Housing”, from our 2015 fall report.

Joining me today is Gordon Stock, the principal responsible for the audit.

In our audit of Canadian Armed Forces housing, we examined whether National Defence and its Canadian Forces housing agency had managed military housing in a manner that supported housing requirements, that was consistent with government regulations and policies, and that was delivered in a cost-effective manner.

I should note that the work for this audit was largely completed in September 2015, and we have not updated our findings since then.

We found that the department had not determined who among members of the Canadian Armed Forces should be receiving housing, what form this housing should take, and where it should be located. We also found that National Defence did not comply with key aspects of its military housing policy. This policy states that National Defence can provide housing only in locations where there is an operational requirement, or where the private housing market cannot meet the needs of military members.

We found that National Defence did not consider whether the private market could meet the housing needs of Canadian Armed Forces members in some locations, although it had market analyses that showed members' needs could be met in some urban locations like Halifax and Valcartier.

We noted that National Defence policy requires that rental rates for its housing units be in line with market rates to ensure that occupants of military housing are treated equitably compared to members living in private market housing. National Defence policy also requires that affordability consideration should be implemented through compensation. This is consistent with government policy.

We found that to set rental rates, the department used appraisal value set by the Canada Mortgage and Housing Corporation until the corporation stopped providing this service in 2013. We noted that the department had market analysis that showed that rental rates for military housing in locations like Bagotville, Edmonton, and Winnipeg were below market rates. This gap could provide occupants with financial benefits that thus create inequities between military housing occupants and private housing occupants.

National Defence must also comply with the Queen's regulations and orders under the National Defence Act, which take precedence over National Defence policy. The regulations may require National Defence to limit the rent charged in order to make housing more affordable. National Defence policy is not consistent with these regulations.

We recommended that the department complete the review of its accommodation policy and clearly define its operational requirements for military housing.

Most of National Defence's housing units were built between 1948 and 1960 and therefore require regular investment to maintain them. We found that while the department had set a goal to modernize its housing portfolio, it had not developed plans that outline the work, time and resources required to meet its goal. It also did not have up-to-date information about the condition of housing units.

The agency spent about $380 million on military housing between the 2012-13 and 2014-15 fiscal years without a plan to guide its spending and without accurate information about the condition of units. As a result, it cannot ensure that funds spent on housing units were used effectively on the highest priorities.

The Canadian Forces housing agency must use its rental revenues only for operations and maintenance. Capital funds received from the department are used for major renovations and new construction. We found that the timing of receipt of the capital funding did not always match the construction cycle. For example, in January 2015 it received $6 million of capital funding, but had just two months left in the fiscal year to spend these funds. Receiving funds late in the fiscal year meant that work could be limited to such lower priority property improvements as building fences or installing sheds.

We recommended that National Defence develop adequate plans that identify the work, time and resources needed to meet the current and future housing needs of CAF members, and ensure that it uses resources dedicated to military housing effectively.

We are pleased to report that National Defence agreed with our recommendations and committed to take corrective action.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson.

We'll now move to Mr. Jones, please.

[Bill Jones, Senior Associate Deputy Minister, Department of National Defence]

Good morning and thank you, Mr. Chair.

I also would like to thank the committee members for giving us the opportunity to be here today to discuss the Auditor General's recent report on military housing.

This is an important topic for us. It is about so much more than putting a roof over a soldier's head. It's about contributing to a better quality of life for the men and women who serve and defend our country, as well as their families. Before I address the Auditor General's specific findings, allow me to touch briefly on how we deliver this important program.

The Canadian Forces housing agency, or CFHA, operates more than 12,000 housing units in 25 locations across Canada. The majority of these units are single or semi-detached with some row housing and a few other types, including apartments. At any given time, approximately 15% of the Canadian Armed Forces members are living in military housing. This can rise to almost 35% to 40% in some areas, mostly from the more junior ranks of the military. The agency regularly assesses the conditions of housing units and receives direct requests for services from the occupants.

In that, Mr. Chair, we are like any other landlord, but the agency goes beyond that, providing peace of mind to deployed members and their families with regular repair and maintenance and 24-hour emergency service. We've invested more than $130 million this fiscal year alone in improvements, renovations, repairs, and maintenance. Mr. Chair, we strive to do the best that we can. We are always trying to do better.

It is in this spirit that we welcome the Auditor General's examination of our housing program as well as his suggestions on how we can deliver better results for our members. In that vein, I also want to thank the Auditor General and Mr. Stock for their very professional work.

The Auditor General made four specific recommendations in his report. I'll address each of them and then tell you how we're working to improve.

The first recommendation was that National Defence should complete the review of its military housing program and clearly define its operational requirements for military housing.

This review is already under way. It began in September 2015 and will conclude in the winter later this year or the early winter of 2017. We expect to issue a revised policy by the fall of 2018. Operational requirements refer to the unique realities of military service, which aren't always reflected in the policy that tries to treat all government employees the same way. Military members think about the same things we do when looking for a place to live, things like cost, style—and style refers to number of bedrooms, and so forth—neighbourhood, proximity to work or their spouse's work, and where they want their children to go to school. But unlike civilians, military members don't get to choose where they work; they are moved across the country based on military needs.

Picture two corporals, one serving in a rural area like Wainwright and the other serving in an urban area such as Halifax. They're doing the same job, but the member in Halifax has many more options to choose from when renting or buying a home. We provide additional options to our members where and when they're needed. We want to ensure our members are treated fairly and have sufficient access to adequate housing wherever they serve. But as the Auditor General noted, we need to illustrate these requirements more clearly in our policy and, Mr. Chair, we will.

The second recommendation was that once the policy review is completed, DND should develop adequate plans that identify the work, time, and resources needed to meet these. Once the new policy is completed, we will put in place a long-term plan that will identify the work, time, and resources needed to keep our housing portfolio in good condition.

Recommendation three was that the CFHA should regularly capture and update its condition assessment information to ensure that it is accurate and available to inform management decisions. The agency updated the system that holds this information in November 2015. This new system provides the agency with faster access to relevant information, which supports better planning and decision-making.

Recommendation four was that National Defence should ensure that it uses resources dedicated to military housing effectively. In particular, it should clarify operating costs and track the costs it expects to be covered by rental revenues. It should also allocate capital funds in a timely manner so that it can plan and use these resources adequately. On the first point, the department is tracking costs as recommended by the Auditor General. On the second point, we'll be providing the agency with confirmed capital funding at the beginning of each fiscal year, which will allow them to plan ahead.

In conclusion, Mr. Chair, it's my expectation that these measures will fully address the issues identified by the Auditor General in his report. We can do better, and we will.

We would be happy to take any questions from the committee.

Thank you, Mr. Chair.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll move to our first round of questioning.

Ms. Mendès, you have seven minutes.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

Thank you very much, Mr. Chair.

I thank all of you for being here today.

Mr. Ferguson's report concerns us. This concerns our troops, wherever they may be.

One question jumps out at me. In paragraph 5.21, Mr. Ferguson's report mentions that the military housing policy has been under review since 2009. Here you are referring to a review which began in September 2015.

First of all, why is there this disparity between the dates? Moreover, why will the revised policy only be ready in the fall of 2018?

[Bill Jones]

Mr. Chair, I'll ask Major-General Joyce to take this question, please.

[MGen Derek Joyce, Deputy Commander, Military Personnel Command, Department of National Defence]

Thank you for the question. It's a great question.

In fact, you're referring to a couple of different studies. In 2010 there was the Leigh Fisher report, a third party report that in essence looked at the requirements for military housing from a certain perspective. The perspective specifically was what do we need to support the lowest-earning members of the Canadian Armed Forces—the privates, corporals, officer cadets, and second lieutenants? The assessment looked at that demographic and then spread that across Canada, across all the wings and bases. The figure that was determined that would be appropriate was just over 5,000 units.

When that figure was presented to the commanders of the army, navy, and air force, they reflected upon it and determined that it did not meet the operational requirements, which was not one of the underlying foundations of that initial study.

The approach we're taking right now, with the study that commenced last fall, is to look at a number of different factors. First off, we're taking a scientific approach. We have our defence scientists working on this, based on a number of agreed-upon principles. A foundation has been agreed upon by the army, navy, and air force on how to move forward with this. It includes such key foundational principles as operational readiness, succession planning, obligations to our foreign military who are actually working in Canada, and support to our ill and injured members who do require military housing. It will take some time to do this effectively and to do this with an evidence-based approach. That's why it's taken this period of time.

[The Chair, Conservative, Kevin Sorenson]

Mr. Jones.

[Bill Jones]

Mr. Chair, perhaps I could add to General Joyce's comments.

At the Department of National Defence, the Minister of National Defence will soon be launching a consultation for a policy review for defence, and so forth. Included in that policy review will be perhaps implications for military housing. Therefore, we want to make sure those implications are included as well. In addition to the requirements for the evidence-based approach, we also have to take into account that there is this policy review taking place over the course of 2016.

[The Chair, Conservative, Kevin Sorenson]

Mr. Lefebvre.

[Paul Lefebvre, Liberal, Sudbury, ON]

Further to Mrs. Mendès' question, there was a report that came out in 2010, and we're now in 2016, and now, after the Auditor General's report in 2015, you say we have to look at this. That's a gap of five years. I'm not sure if I understood properly what happened within those five years as you guys were coming up with your plan. Obviously, you determined that it was an issue and you started to look into it, but where are the tangible results from those five years? What is that gap for?

[MGen Derek Joyce]

The army, navy, and air force, as they looked at the figures of the Leigh Fisher report, determined, as I mentioned, that this was not satisfactory, and so we came out within the department with an agreed-upon figure of just over 12,000 units.

There is a gap, and to be quite frank with you, the gap was essentially caused by a couple of things. The policy is held within the director general of morale and welfare services, and specifically, the director of military family services. That is the organization that develops the policy.

That organization during this period was dealing with some fairly significant issues relating to support to our military family members. Particularly at the tail end of Afghanistan, there was a lot of work by that organization to improve the services for our military families in the wake of the end of the war in Afghanistan. That's where much of the focus was put by that organization.

To be quite frank, there were sufficient military housing units across the country for the most part on most bases, and so the urgency wasn't necessarily there. The focus of that organization was thus put towards the policies and programs of supporting our families and members transitioning as well.

[Paul Lefebvre, Liberal, Sudbury, ON]

If I understand properly, given that the resources were tapped to focus on families during that period of time, support for housing was not a priority or was less prioritized than support.

Would you agree with me then, given that there was no plan, that if a strategic plan had been put in place and it had been known that certain resources were allocated to families that had certain needs—if there had been a proper plan in the first place for housing—the military would have been able to follow the plan and provide the support during those five years, and then we wouldn't be talking about it in 2016?

[MGen Derek Joyce]

You're absolutely correct.

The Leigh Fisher report was intended to do that. Unfortunately, the end result of that study was not deemed to be acceptable for operational support reasons for our members.

[The Chair, Conservative, Kevin Sorenson]

Thank you. Your time is up, but we'll get you on the next round.

I will now move over to the opposition, to Monsieur Godin.

You have seven minutes.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chair.

I thank the witnesses for appearing before the committee this morning.

We are here to put questions to the representatives of government institutions concerning the proper management of public funds. Upon reading the Auditor General's report, I have some questions and I would like you to reassure me.

In fact, we are talking about housing. In the report, we see that you have about 12,000 housing units in 25 cities. In paragraph 5.27 of the report, I see that in 2010, you hired a group of consultants, and they felt that you needed 5,800 units to meet your needs effectively. Paragraph 5.28 of the report states that “senior military officials did not agree with the report's conclusion.”

There is a report which some people do not accept, and it says here that you need 11,858 units in 25 locations. The Auditor General found that no specific methodology was used to arrive at that figure.

Could you simply explain all this to us, and tell us what the process was, and what the real needs are for National Defence housing?

[MGen Derek Joyce]

I would be happy to take that as well, sir, if you're okay with that.

As the commanders of the army, navy, and air force at the time assessed that the figure of 5,000 plus the 5,800 units from the Leigh Fisher report was not meeting their operational needs, what in fact my organization did was reach out to the commanders of the bases and wings across Canada and consult with them for the first time on what their actual operational needs were.

That's how the figure was developed, through the bottom-up assessment of their local needs by the base and wing commanders for their operational requirements.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

You said a bit earlier that you are like a landlord. You have to be aware of the needs and know the properties. Going by what you said and what I read in the reports, you do not seem to be in control of the situation. In the private sector, you have to know what products are available and you have to manage things carefully. You also have to make the best use of taxpayers' money. Can you confirm today that you are in control of the management of housing for our military who, may I say in passing, deserve this service? I think we have to be grateful for the work they do, but we need to know the cost of things.

[Bill Jones]

Chair, let me try to answer.

There are two parts to the question, I would propose. The first is, do we have an appropriate policy that sets forth how many units we should have, what are the operational requirements, and who in the military should be getting housing, and so forth? That exercise is under way. From that perspective, Chair, we need to do a better job and define that policy, which will provide the road map that I suggest the member is thinking about.

The other perspective is in terms of not the policy but the property management aspect. The Auditor General, in addition to policy issues, has talked about some of what I'll call property management issues. There we need to do a better job of collecting information on the condition of the housing, and so forth, a better job of providing a work plan to address the condition, and also a better job of providing funding more up front so the housing agency can do a better job. That work is under way as well.

I would suggest that from a policy point of view, we have to do a better job from the property management point of view. We are making strides and doing a much better job.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you.

In his report the Auditor General noted that National Defence did not have an adequate plan in place to manage housing. You gave us to understand that you are working on this. Do you think that the Canadian Forces Housing Agency would be in a better position to meet the current and future needs of members?

[Bill Jones]

From my perspective, I think the short answer is yes. Work is under way to improve things, but with your permission, Chair, I'll ask the head of the agency to provide a few brief comments.

[Dominique Francoeur, Chief Executive Officer, Canadian Forces Housing Agency, Department of National Defence]

Thank you, Mr. Jones.

Mr. Chair, I can assure you that the agency has plans in this regard. We agree with the Auditor General's recommendations on what needs to be improved. We are going to ensure that we meet the future needs of the agency through a detailed plan and with all of the necessary resources.

I want to point out that we do meet current needs. Over the past four or five years, we invested a lot of money throughout this portfolio. The lack of adequate planning that was mentioned concerned future needs. That issue will be settled as soon as we have defined our operational needs. We will adjust our plans accordingly.

Currently, the agency is developing specific plans for each of its sites, plans that include the condition of each house. We are aware of the condition of each of the dwellings. Our system has just been completely updated. And so we have no doubts about the information we have on each home and on what needs to be done. This plan will be adjusted in future so as to reflect new operational needs.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Godin.

We'll now move to Mr. Christopherson, please, for seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good. Thank you very much, Chair.

Thank you, all, for attending today. We appreciate it very much.

I have to say when this first came out, my first thought was the poor previous government couldn't buy helicopters and they couldn't buy jets, and it turns out they couldn't even buy houses. I was very distressed to see that after so many years, decades into centuries of having a Canadian Armed Forces, something as basic as where our soldiers live is not a highly tuned, accurate, pretty ongoing, run-of-the-mill procedure and policy, and a top priority. Yet one doesn't get that sense looking at all of this. I have to tell you it's very disappointing.

I suspect there is a lot more attention paid to maintaining tanks and equipment than there seems to be around providing proper and adequate housing for our service personnel.

When I look at the Auditor General's quotes, this is not small stuff. This is pretty damning. The Auditor General said in his report:

Overall, we found that the Department of National Defence and the Canadian Armed Forces...did not comply with key aspects of its military housing policy. We found that National Defence did not clearly define its operational requirements for military housing.

This seems strange because operational requirements is an area in which they would have great perfection, you would think. “We also found that, at some locations, it did not consider how the private housing market could meet” some of the needs, and that goes on in great detail. Again, that doesn't sound like such great, deep original policy thought—duh—what's already out there might be available. No, this is pretty common-sense stuff.

I will read the response from Mr. Jones: “It's why our housing program is about so much more than putting a roof over a soldier's head. It's about contributing to a better quality of life for the men and women who serve and defend our country, as well as their families.” It's absolutely true, but at this stage, it's a lot of bromides. That should be the starting point, not the answer to why we have these problems.

Before I get into any minutia, and I'm probably not going to have a whole lot of time and I accept that, but I'd like to hear once again some kind of a snapshot explanation for the Canadian people of how the hell we got into such a mess in something that is so fundamental to our armed forces, who are the actual citizens who put on the uniform every day. How did we get here?