Public Accounts Committee on Sept. 25th, 2025

[Coleen Volk]

The way this works is that when we engage an employee, there is a job to be done. That job is classified. We determine the salary that is appropriate, the level of compensation that's appropriate for that position. We give a percentage of that salary as base pay, and they get to collect that every two weeks as part of their base pay. However, we reserve part of it; we hold back part of it. That is the component that.... At the end of the year, we assess whether that individual has met the commitments that they made that year. Did their performance meet the expectations that we had of them? If it did, they earn back the rest of the pay that was put at risk at the beginning of the year.

[Anthony Housefather, Liberal, Mount Royal, QC]

I'll put this into number terms so that people at home can understand this. In many companies, for example, if you earn $80,000, you'll be eligible for a bonus. You're still going to be paid your $80,000. However, let's say that you're eligible for 10% bonuses based on your personal objectives and departmental objectives. At the end of the year, people assess whether the department met the objectives and whether you met your objectives, and you may potentially get another $8,000, so you would be paid $88,000 instead of $80,000. You got $80,000 for sure, and then you got $8,000 because of exceptional performance.

What you're saying is that you're paying somebody.... Their base pay is $80,000, but you're withholding $8,000 of it, for example. So, you're withholding 10%, and they're paid only $72,000 instead of their normal $80,000 base pay. If they meet the objectives—not exceed the objectives but meet the objectives—then they'll get the additional $8,000 to bring their base salary to the total, to 100% of $80,000. Would that be a fair way to explain it?

[Coleen Volk]

That's a fair characterization of pay at risk. It is not that at the end of the year we determine that the company has had a tremendous year and we're going to throw a little bit extra to everyone. It's that we have determined how much we feel your job is worth, we've paid you part of it up front, and the rest of it you have to earn by meeting your objectives over the year. It's a very fair characterization.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you very much.

Ms. Hogan, I'd like to go to you.

I'm going to repeat one paragraph from your report that I think is incredibly important. You mentioned it in the previous round of questions:

Some federal tenants reimburse (or pay rent to) Public Services and Procurement Canada for the office space they occupy, while others follow a different model where the amount of space they occupy has no impact on their budget. Of the 15 tenants cited above who did not agree to the reduction of the space they occupy, 13 (or 87%) had no financial incentives to reduce the space. In total, 93 federal tenants (89%) do not reimburse the department for the space they occupy.

Ms. Hogan, you just mentioned that you yourself—your department—is one of those. How come in the recommendations you made in this report you didn't say that everyone should pay rent for the space they occupy so that they'd be incentivized to reduce space? Of course, if you're philanthropic, as you are.... I see people who will selflessly say “We should reduce space for the benefit of everyone”, but clearly that didn't work with respect to many of the other departments.

Why would we not create a model where everybody pays rent in their budget for the space they occupy?

[Karen Hogan]

That is a policy decision that the government has made: that one department will own and/or lease the building and then it is given to tenants. I don't make recommendations to change policy. I just talk about how the policies are implemented and whether I think there are some unintended consequences. I think that's one of them here. There is a missing incentive to reduce office space, but that's just one of the elements I cite. I cited other reasons as well that departments felt they weren't ready to reduce their space.

[Anthony Housefather, Liberal, Mount Royal, QC]

I totally understand that, and I totally understand the other reasons, but it would seem to me that this would be a very important reason, if you have no consequences in terms of loss of budget for a failure to reduce space. I used to work as a CAO of a multinational, and one of the departments I headed was real estate. Of course, the main incentive for everybody to reduce space is that it deeply impacts their bottom line.

I understand that you're not allowed to make such recommendations in your report, but is there a simple fix for the government to change that policy to allocate costs differently?

[Karen Hogan]

Well, I think this is a conversation that Public Services and Procurement Canada could really weigh in on, since they're the custodians of the property. What do they think might incentivize? They've been having negotiations with departments that are hesitant to hand over space. I would imagine that since our report they're continuing that. Hopefully, there is some progress.

I think it's important to know that when you look at departmental financial statements—not to bore folks with accounting terminology—accountants do put a value on a service provided without charge, so you can see how much it costs for that department to function, but it really doesn't have a cash impact on a department's budget.

[The Chair, Conservative, John Williamson]

Thank you very much. That is the time.

I'll just remind members that in our report we have the ability to make recommendations as well, either to complement or to reinforce the auditor's good work.

The next speaker will be Mr. Lemire, who has two and a half minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

I want to remind you that we're talking about a report that mentions that the affordability criterion used for the initiative isn't based on household income. In fact, renters with the lowest income brackets and the greatest need for affordable housing are the ones who benefit the least from the initiative.

What we're also seeing in response to the current housing problem is the creation of a department of housing, in which we're essentially recreating what existed at the Canada Mortgage and Housing Corporation, or CMHC, but in a new structure with new public servants. First, is this a repudiation of CMHC? How is that going to change the housing supply on the ground? Why isn't this money earmarked for human resources being used directly to build housing in the provinces, instead?

What is currently happening is yet again a duplication of structures. Quebec is going to take similar steps and, what's more, the federal government doesn't have the same standards—which results in delayed projects that don't come to fruition. In my riding, Abitibi-Ouest, a planned shelter for victims of domestic violence was nearly denied funding and completely cancelled because of battles between the two levels of government, which have different criteria.

How will the new structure support construction on the ground?

[Paul Halucha]

The heart of your question is, as I mentioned earlier, the key importance of collaboration between different jurisdictions in having common housing goals. We have been successful as a department in developing agreements with provincial governments and, in many cases, municipalities across the country. We do have experience working with different levels of government.

With Build Canada Homes, the intention is for it to function more as an investment bank and less as an organization that has allocations of resources for different jurisdictions. I can tell you that the minister hosted an FPT meeting about two weeks ago in Vancouver, and there was a lot of support for a collaborative approach between provincial and federal governments, in terms of supporting housing projects. The focus will be around a portfolio of projects.

To your earlier point, it will assist rural areas, because one of the challenges they often have is that the local capacity to support NGOs and municipalities to move their projects forward is often not as high, so the aggregation we're looking for with provinces will be a key way of both unlocking intergovernmental support and actually reaching rural areas a lot more successfully than perhaps we have under past programming.

[Le président, Conservative, John Williamson]

Thank you very much.

Mr. Lemire, your time is up.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Okay. I would just like to ask Mr. Halucha if, in addition to the points I mentioned earlier, the department can provide the committee—in writing—with the rural and remote action plan that includes the methods and criteria that will be used for assessment.

[Paul Halucha]

Yes, of course.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you very much.

[Le président, Conservative, John Williamson]

Thank you very much, Mr. Lemire. You'll have another round of two and a half minutes.

Mr. Deltell, you have the floor for five minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Ms. Hogan, I'd like to start by asking you a question about the federal government's use of office space.

You take a rather worrying factual view of the progress achieved towards the objectives. You say that the department “estimates the reduction in federal office space will generate savings of approximately $3.9 billion over the next 10 years.” However, you found that little progress had been made in this regard, with a reduction of less than 2% between 2019 and 2024. You say that this is due, among other things, to the reluctance of some departments to reduce their footprint.

Could you give us a few examples of certain departments that aren't doing what they should be doing?

[Karen Hogan]

I don't have the names of the departments in question, but I know that, during the first wave, Public Services and Procurement Canada, or PSPC, approached the largest federal tenants, those occupying a large share of the office space. To date, very few of them have signed an office space reduction agreement. They cited their mandate, the space required and concerns about the possibility of increased demand for in-person work. They didn't want to reduce their office space in case they ran out. Furthermore, in my opinion, there wasn't enough of a financial incentive for them to undertake that reduction.

Consequently, I believe PSPC needs to take a more global and directive approach in this regard to ensure greater progress.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

What might a more directive approach, as you call it, look like?

[Karen Hogan]

There are two parts. First, agreements need to be signed. That's essential. However, progress must also be made on the office modernization projects. Prior to the pandemic, everyone had their own cubicle or office. Now, reserving and sharing offices has increased significantly. This modernization is costing money and taking time. This process is also progressing slowly at present.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

In your opinion, will the objective of saving nearly $4 billion in 10 years be achieved, yes or no?

[Karen Hogan]

That's the department's estimate. I didn't verify all the hypotheses on which that estimate is based, but we included it in our report to demonstrate that there are real repercussions. Indeed, even if a building is not being used or is being only partly used, it still costs money. There are operating and maintenance costs, but there are also municipal property taxes or financial compensation in lieu of property taxes to pay. If a building is not used to full capacity, it costs money.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

We know that, over the past 10 years, the government hired more public servants.

According to the Fraser Institute, 90,000 new public servants were hired between 2015 and 2023, an increase of 26%. However, the population increased by only 9% over the same period. The increase in the number of government employees was three times greater than the increase in the population.

Could this be a reason why we're unable to reduce office space?

[Karen Hogan]

I think the underuse of office space was noted prior to the pandemic, before the public service grew. Obviously, the number of public servants using these buildings will always fluctuate. However, to determine to what extent the buildings are being used at present, a critical piece is missing.

In my opinion, understanding that critical piece would help ensure progress. The goal is to reduce office space by 50% by 2034. However, if nothing changes now, that goal will not be reached. That's why Public Services and Procurement Canada, or PSPC, really needs to change its approach.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

What I take from your testimony, Ms. Hogan, is that the goal won't be reached.

Ms. Volk, I'd like to come back to the housing accelerator fund. We recall that it was launched to great fanfare and the minister responsible made a number of announcements in his province of Nova Scotia, including in West Hants, East Hants and Antigonish. The plan was to build 333 new housing units within three years and 4,570 housing units within 10 years. Where are we now?

[Coleen Volk]

I don't have the precise figures for the starts in any particular region. I can happily share those with the committee in writing after.