Public Accounts Committee on March 22nd, 2016

[Bill Jones]

Chair, and to the member, thank you for the question.

As I said at the outset in my opening statement, we agree with the Auditor General's finding. I stated very clearly we have to do a better job and we intend to do that, Chair, and that's the approach we're taking. We have to look at it from a policy point of view in terms of what our operational requirements are, as well as we're approving the day-to-day management of this portfolio. That's what we intend to do. We will do better.

[David Christopherson, NDP, Hamilton Centre, ON]

That's it. I hear you, and I don't want to be unfair. Again, if this was something new and you'd done your best and it didn't quite work and now you're going to improve it, I would have a lot more comfort just accepting what you're saying. But that's not the case. This seems to be quite chronic, and what bothers me is that it's on the human side. I'd rather hear that you're losing track of counting bullets than I would that you've lost track in providing decent and affordable housing for our soldiers, because remember, it's not just them, it's their families too. This should be a bigger priority, and it sounds like it's just a lot of rhetoric.

For instance, sir, again it's on your comments this morning. In recommendation two, the Auditor General said once the policy review is completed, DND “should develop adequate plans that identify the work, time, and resources needed to meet these requirements.” Your answer, sir, was, “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.”

How is that any different from the other commitments that have been made all these times before? How, sir, is this any different, and what assurance do we have this time that you actually mean it?

[Bill Jones]

Mr. Chair, again I thank the member for the question.

The issue is that we need to do a better job to define our requirements, the number of units we need, the type of units, the location, and so forth. Once we have that information, once the policy has been set, then we will be able to put in place a more appropriate and specific management plan. Having said that, Mr. Chair, while that process is under way, we are doing the best we can with the resources we have to keep that portfolio in the best shape that we can.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

You mentioned “with the resources we have”. Is that to suggest resources may be an issue here?

[Bill Jones]

Mr. Chair, I thank the member for his question.

As we indicated, we spent $130 million in this fiscal year alone to maintain the military housing portfolio. We're doing the best we can to deal with that portfolio.

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate that. You throw out $130 million, and that's a big number, but in terms of what the need is, it doesn't really mean anything. If it's only half what the need is, it's a small number. I hear what you're saying, but what I'm not hearing, Mr. Chair, is something that gives me and those who have heard these promises before the assurance that it will be different this time. I'm not hearing a single thing that I suspect was different the last time they went around, and I'm looking for that this time. I want to hear some kind of a commitment above and beyond, “We didn't do as well as we should have, and we know we have to do better planning, and promise to do better.” We've been there before. That's how we got here. I want to hear something more than that.

[Bill Jones]

Mr. Chair, again thank you to the member.

What I would say is that the management action plans that we've laid out in response to the Auditor General's report are more detailed than what I indicated in my opening statement. We stand by those, given the timelines, and so forth. That's point one. Point two is I'm sure there will be appropriate follow-up and timely follow-ups by the Auditor General and his folks.

In addition, I have asked our internal audit folks to keep a careful eye on this particular file as well so that, while I understand that words can sometimes ring hollow, I think there will be appropriate follow-up. Finally, as we go through the defence policy review, I think that the issue will also be there because a prominent priority of the minister certainly has been how the members are looked after.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Jones.

We'll now move to Ms. Shanahan, please, for seven minutes.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you, Mr. Chair.

Thank you, everyone, for being here this morning.

I too was going to get into the property management aspect, because there's just so many things, among others, that shout out from the page. The fact is that so few units, fewer than 1,000 units, were actually updated, renovated, or whatever over a period of what looked like close to 10 years. I may be be corrected on that, but I saw that. When I look at a stock of 12,000 units, with an average lifespan of 10 to 15 years, that's clearly inadequate.

The resources should be there, because if you're charging market rates, then the rental income should cover repairs. The whole capital spending coming in too late for the construction site.... These are easy things, relatively speaking, to repair, but what I'm really hearing is a classic case of mission drift, and I think that's the root of the problem.

When I hear that housing was being given to support veterans of the Afghanistan war and their families, essentially it's veterans housing. Of course, we are moved in that direction, but I want to get to the root of the purpose of this military housing. Originally, it was to meet the needs of performing actual military tasks, because they need to be on base to complete their tasks. If you need to provide housing where there is none, such as in a remote area, you need to provide that housing. You need to provide financial support to members in need. Maybe that is a reason, and that needs to be incorporated. Here this morning is the first time I've really heard about that.

If it's to provide a benefit to military members who just happen to be in the right place at the right time, and we're talking about an actual taxable benefit, I'd like to hear from the Auditor General if there's a risk that members are going to be reassessed on below-market rental rates for x number of years—I've seen that happen in other corporate housing situations—then we've really got ourselves into a mess. I would like to have some comments on this. Has that really been addressed? The purpose of the agency in providing the housing is not to make money, but it's not to lose money, and it is to provide effective housing. So what's it going to be?

[Bill Jones]

Mr. Chair, through you to the member, thank you for the question.

There are a number of issues in the question. Very briefly, in order to answer many of these questions, we need to get that clear policy statement, which will define our operational requirements and the needs from a military perspective. That is what we are working on, and that will hopefully answer many of the members' questions. Unfortunately, we are not there yet.

In terms of compensation versus subsidized housing, as the Auditor General has noted, government policy is clear: members should not be subsidized in their housing allowances or with below-market rates. If there are issues in terms of dealing with that, it should be through their compensation package, which I believe is similar to what other public servants have. At a very high level, that is basically the policy.

In terms of some of the property management issues, Mr. Chair, with your permission, maybe Ms. Francoeur could answer briefly.

[Dominique Francoeur]

Thank you, Mr. Chair.

You had a question about the resources, in your first comment. Indeed, the agency collects the rent, and we are self-sufficient in all the operations of the agency across the 25 locations, including what we call the life cycle, minor repairs and so on.

Where the department funds us or helps us is with the recapitalization of the portfolio, or capital investment. That is where the department figures into it. As was noted before, the portfolio is very old, and it needs more than just life cycle. We have invested a lot of money in the last five years. The department was able to provide us with a lot of capital funding, to a point where the condition of the houses has improved significantly.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Correct me if I am wrong, but you must have some valuable real estate. Can you buy and sell real estate?

[Dominique Francoeur]

No, I don't, at this point.

In terms of the future, though, when we say we will develop a plan.... Let me put it into perspective. When the agency was created in 1996, the idea was to manage the portfolio on a national basis. Before, each base and each wing managed a portfolio. Now, with the creation of the agency, it is being managed nationally. When we got the portfolio, we had 22,000 units. We are now down to 12,000 units.

Another good perspective for the committee, if I may, is the fact that we serve 15% of the military population. The rest of the members live in the economy, so they find housing in the economy. The rationalization plan we developed was our effort to make sure we would go down to rightsizing the portfolio. Those efforts are continuing. Then, with the revised operational requirements and the new policy, we will be able to continue on the rationalization path and adjust wherever we need to adjust.

To answer your question, part of how we meet the operational requirements will be an assessment locally, base by base, or regionally if it makes sense, of the best way to serve the members at a given place, given the operational requirements. All the scenarios will be looked at.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now move to Mr. Godin, and then we will come back.

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

Thank you, Mr. Chair.

Mr. Jones, you were saying that you tried to do your best with available means. You also mentioned that you invested $130 million. Everyone has a lot of good intentions, but I think that the housing file has to be managed more rigorously. What is missing that would enable you to have a vision, a plan, a strategy and an objective?

Perhaps I am repeating myself, but I get the impression that you are not in control of the situation. I am sure your intentions are good, but as my colleague was saying previously, what we are hearing today is identical to what we heard the last time you were here. Things seem to get postponed indefinitely. Everyone has good intentions, but I don't see any improvements in this file.

[Bill Jones]

Thank you for the question.

I apologize if I repeat myself.

It is important to understand that we are striving to put forth a clear, understandable policy that will define the military operational requirements upon which we can base the military housing program. It is well under way, as General Joyce has said.

In parallel, I can assure you we are working to improve the property management of the military housing portfolio. We have detailed specific action plans that address the Auditor General's report, including the provision of more funding up front, so that we can better plan while providing and using a better information system that has been populated with better conditions in the housing portfolio, and so forth. Many of these things are under way.

At the end of the day, we will see whether we've done what we've said we've done with a follow-up from the Auditor General, or in our own internal audit where we will do follow-ups on this as well.

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

You are preparing a plan and developing policies, that's fine, but I want to talk to you about a specific situation.

I am from the Quebec region. In one neighbourhood there are what are commonly known as barracks. They have been empty for several years. Will a decision be made about that? Are you going to wait for an Auditor General's report before these properties are soundly managed?

The land and the barracks have some value, but astronomical sums were invested in the Valcartier military base to update cadet camps in order to house Syrian refugees. Do you know how many Syrians are currently housed in these barracks? Not a single one.

I have questions about how this money was spent. You said earlier that you are like a private landlord, but what measures do you intend to take to manage your housing portfolios properly? Today, I do not think they are being managed properly. I do not feel reassured about this.

Could you answer my question concerning the Valcartier base barracks that were upgraded? The barracks that are a few kilometres from those may be unusable, but if that is the case, let's demolish them and do something else with that land.

[Bill Jones]

With respect to the monies that were expended to prepare for the Syrian refugees under that program, those monies did in fact upgrade some of the facilities there and will be used by the military down the road. In that sense they are useful. No Syrian refugees, you're quite correct, were placed there. Nevertheless, those expenditures were pulled forward in advance of that particular program.

On the Department of National Defence side, we didn't know at the forefront whether we would have Syrian refugees there or not, but we had to prepare for them and that's what we did.

In terms of investing in barracks, I'll ask Dominique or Jaime to talk about that.

[The Chair, Conservative, Kevin Sorenson]

The time is pretty well up, so it has to be a really quick answer.

[Jaime Pitfield, Assistant Deputy Minister, Infrastructure and Environment, Department of National Defence]

The investment in terms of the barracks is there and it will be used for the troops. That's infrastructure that National Defence needs on an ongoing basis. It won't be wasted. That money was spent in case of something, but over the long-term that will be used.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Pitfield.

Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Jones, you said that you have invested $130 million. This sounds good, but it's just an absolute number. It does not reflect whether that's adequate.

In paragraph 5.39 of his report, the Auditor General found that the Canadian Forces housing agency “was working under constraints that limited its ability to spend its funds effectively on military housing”. I would like to know more about that. What are the constraints under which the agency was operating?

[Bill Jones]

Chair, I'll ask Ms. Francoeur to respond, if that's okay.

[The Chair, Conservative, Kevin Sorenson]

Ms. Francoeur.

[Dominique Francoeur]

Mr. Chair, the constraint the Auditor General is referring to is the fact that in regard to the money we get from the rent we collect, as I said before, we pay for all of the operations with that money. These are the operations at the site level and also the full operation, including the life cycle. It's a rule that the rent we collect is one collar of money, and it limits me. I cannot use that money to do major recapitalization of the portfolio. That's where the department gives me that money. That's one constraint.

The other constraint, which is also being rectified with recommendation four, is the fact that sometimes the department did not give me the whole amount at the beginning of the fiscal year. I got money later, two months into the fiscal year. That also implied that I was reactivating some of the work. I always have a long list of projects ready to go in case I get the money. That constraint will be eliminated by the fact that the department will now give me the money ahead of time.