OGGO Committee Report

Introduction

From October 19 to December 9, 2010, the Standing Committee on Government Operations and Estimates (hereafter the Committee) held five meetings looking into the effectiveness of the expenses incurred for the G8 and G20 summits. The Committee’s observations and recommendations are set out in this report.

Security and Organization of the G8 and G20 Summits

Appearing before the Committee, the Honourable Lawrence Cannon, Minister of Foreign Affairs, stated that planning a meeting of the political leaders of influential countries is a huge undertaking, beyond the scope of the government’s usual activities:

The host must shepherd the process of setting an agenda, must ensure all delegates will be housed and fed when they arrive, that media will be able to cover the event, and, most importantly, that all who participate are safe and secure.

Hon. Lawrence Cannon, Minister of Foreign Affairs
Evidence, No. 43, 40th Parliament, 3rd Session, 8:35.

Mr. Alphonse MacNeil, Division Operations Commander 2010 of the G8 and G20, Integrated Security Unit, Royal Canadian Mounted Police (RCMP), told the Committee that the RCMP was responsible for security during the G8 and G20 summits:

Guided by a number of acts and regulations, the RCMP was mandated to ensure the safety and security of all internationally protected persons during the summits. Additionally, we had primary responsibility to ensure the security for the proper functioning of the meetings.

Mr. Alphonse MacNeil, Division Operations Commander 2010 of the G8 and G20
Integrated Security Unit, Royal Canadian Mounted Police, Evidence, No. 33, 40^th Parliament, 3^rd Session, 8:45.

Mr. MacNeil stated that confirmation that the G20 would be held on the same weekend as the G8 led to a radical shift in approach and a substantial change in the budget. Over 20,000 officers were mobilized, the biggest mobilization of security personnel in Canada, he said. Although the summits lasted just three days, Mr. MacNeil said most of the security officers arrived at the venues 10 days before the summits. He stated that this increased security costs because food and accommodations had to be provided for the officers from the time they arrived.

Mr. MacNeil stressed that the RCMP worked closely with its security partners and Public Safety Canada to develop and implement exhaustive, comprehensive security plans. With regard to the command structure, he told the Committee that the City of Toronto was divided into four quadrants:

[T]he RCMP had responsibility for the internationally protected persons and the venues. That’s the simplest way I can explain it.

If you think about the MTCC and draw a circle around it, inside that circle was RCMP responsibility. If you draw another circle all the way around the hotels in downtown Toronto, that was RCMP responsibility, so even though it was within the city of Toronto, the RCMP had jurisdiction for that period of time, and Toronto had given us the authority to go ahead and look after it. Everything outside that circle—the interdiction zones and everything else in the city of Toronto—was Toronto Police Service jurisdiction, and they were responsible for command decisions on the ground at that level.

Mr. Alphonse MacNeil, Division Operations Commander 2010 of the G8 and G20
Integrated Security Unit, Royal Canadian Mounted Police, Evidence, No. 33, 40th Parliament, 3rd Session, 10:10.

Mr. Sylvain St-Laurent, Vice-President, Comptrollership Branch, Canada Border Services Agency (CBSA), stated that the CBSA processed more than 604 heads of state, foreign ministers, royalty, and heads of world organizations:

Over the four-day period leading up to the summits, the CBSA processed over 604 heads of state, foreign ministers, royalty, and heads of world organizations, as well as approximately 2,000 people in their immediate entourages. In addition, the CBSA also processed over 250 individuals via ministerial level courtesy clearances for the over 90 preparatory visits in the six months preceding the summits.

Mr. Sylvain St-Laurent, Vice-President, Comptrollership Branch
Canada Border Services Agency, Evidence, No. 33, 40th Parliament, 3rd Session, 8:50.

Expenses Incurred for the G8 and G20 Summits

During its study, the Committee heard from various departments and agencies to examine how they spent their budget and to determine the total costs of holding the G8 and G20 summits.

Appearing before the Committee, Mr. Ward Elcock, Former Coordinator of Olympic and G8/G20 Security, Privy Council Office (PCO), stated that the Government of Canada had set a total security budget of $930 million in view of the moderate risk of holding the two summits in Canada:

Based on a medium threat assessment and a review of the business cases brought forward, the Government of Canada budgeted up to $930 million for security for the two summits. That amount included a contingency reserve of about $55 million for unforeseen costs. Canada hosted two separate and independent summits in separate geographic locations, which frankly is unprecedented. The reality of the situation was that the magnitude of the endeavour required security operations, including land, air, and maritime components, and multiple security partners because of the various jurisdictions.

Mr. Ward Elcock, Former Coordinator of Olympic and G8/G20 Security
Privy Council Office, Evidence, No. 30, 40th Parliament, 3rd Session, 9:50.

In response to questions from the Committee about the total expenses incurred for the G8 and G20 summits, Mr. Elcock stated that the Government of Canada did not know the final cost for security at the summits. He went on to say that the provincial police services that took part in the summits had not yet submitted their expenses and that the Government of Canada had accordingly not yet been able to verify whether they were in compliance with the contribution agreements signed with the various provincial partners:

At this point we don’t know what the final security costs will be. In some cases that is because the numbers haven’t come in yet. For example, the province in respect of the Ontario Provincial Police and also Toronto city and Huntsville are in for some money, but they have to submit those accounts and they have to be audited before we’ll know.

Mr. Ward Elcock, Former Coordinator of Olympic and G8/G20 Security
Privy Council Office, Evidence, No. 30, 40th Parliament, 3rd Session, 10:00.

Some Committee members questioned Mr. Elcock about the statement that the costs of the G8 and G20 summits held in other countries were much lower than those of the summits held in Canada. Mr. Elcock replied that countries have different ways of accounting for the costs of major international events. He suggested that the difference between the costs of the summits held in other countries and of the G8 and G20 summits in Canada was primarily that the Government of Canada had provided a more complete accounting of the security costs of the 2010 summits than any other country:

I have been asked to comment on that in the past and I would say the same thing I have said before. The reality is that different countries account for the amounts they spend on those events in different ways, and some countries.... Canada is probably, and I assume it’s to our credit.... We account for those costs in a more fulsome way than any other country that I am aware of.

Mr. Ward Elcock, Former Coordinator of Olympic and G8/G20 Security
Privy Council Office, Evidence, No. 30, 40th Parliament, 3rd Session, 10:05.

This statement corroborates what Kevin Page, Parliamentary Budget Officer (PBO), stated in his report, Assessment of the Planned Security Costs for the 2010 G8 and G20 Summits:

The Government of Canada has been relatively transparent, when compared to other countries, on the costs of security related to the summits. The total cost of security for the 2010 G8 and G20 Summits amounts to $930M, which includes $507M for RCMP, $278M for Public Safety, $78M for National Defence and a $55M contingency reserve.[1]

The PBO found it difficult to find comparable data of past events to assess the security costs related to the 2010 Summits. This is largely due to the lack of disclosure by other jurisdictions, differences in key considerations and cost drivers of summit security and differences between base versus incremental funding.[2]

Mr. Peter McGovern, Assistant Deputy Minister, Foreign Affairs and International Trade, stated that he had a budget of $249 million for the summits:

Like Mr. Elcock, we prepared briefs for submission to cabinet for G8 preparations. At the end of September 2009, when the G20 summit was announced, we redid the process and we added the G20 budget. The two budgets together, from my end, come to $249 million.

Mr. Peter McGovern, Assistant Deputy Minister, Asia and Chief Trade Commissioner
Department of Foreign Affairs and International Trade, Evidence No. 30, 40th Parliament, 3rd Session, 9:50.

Based on this testimony, the Committee estimated the total planned costs at $930 million for summit security and $249 for organizing it, for a total of $1.18 billion.

On October 7, 2010, the Committee adopted the following motion to obtain a more detailed breakdown of the expenses for the G8 and G20 summits:

That the Committee requests the Government provides it with the details of all costs associated with the G8 and G20 Summits, from all departments and agencies, including for goods, services and overtime salaries, providing for each contract (i) the name of the contractor, (ii) a description of the goods or services provided, (iii) the value of the contract, (iv) how the contract was awarded, (v) whether the cost was associated with the G8, G20 or both, within 10 business days.[3]

On November 5, 2010, the government responded to the Committee’s motion. According to the documentation the Government of Canada provided the Committee, the estimated costs were $858 million as of October 28, 2010.[4] This is $274.8 million less than the $1.13 billion in spending authorized by Parliament. The expenses incurred by the RCMP, the Department of Public Safety, the Department of Foreign Affairs and Infrastructure Canada represent close to 90% of the total estimated costs of the G8 and G20 summits.

Mr. Mark Potter, Director General, Policing Policy, Public Safety Canada, told the Committee that the security partners had undertaken in the contribution agreements to submit all their invoices relating to the summits by December 1, 2010. In mid-March 2011, when the Committee was considering its report, the Government of Canada had still not published the final costs of the G8 and G20 summits.

While the motion of October 7, 2010 does not provide any details about the breakdown of the requested costs, the Committee wishes to point out that the cost breakdown expense categories used in the documentation provided by the Government of Canada differed significantly among departments and agencies. As a result, the Committee was unable to aggregate or directly compare the G8 and G20 costs of the departments and agencies under each expense category.

After reviewing the evidence heard and the information gathered, the Committee also noted that the Government of Canada requested Parliament’s approval of the expenditures for the G8 and G20 summits in the 2009-2010 Supplementary Estimates (B) and (C), the 2010-2011 Estimates and the 2010-2011 Supplementary Estimates (A). The Committee recognizes that it is customary for the Government of Canada to request Parliament’s approval of expenditures when they are incurred. The Committee is also of the opinion however that the spreading out of funding requests for an initiative over several estimates, combined with the lack of official information on the total planned costs of the initiative, makes it more difficult for parliamentarians to oversee expenditures. Accordingly,

Recommendation 1:

The Committee recommends that the Treasury Board Secretariat of Canada from now on present in the estimates and supplementary estimates the total planned costs for all initiatives with an estimated value of over $500 million.

G8 Infrastructure Fund

One of the subjects raised during the Committee’s study was the expenditures incurred under the G8 Legacy Infrastructure Fund. The Committee learned that Infrastructure Canada had spent $45.7 million on 32 projects in the whole Parry Sound-Muskoka region.

Mr. Bryce Conrad, Assistant Deputy Minister, Program Operations, Infrastructure Canada, stated that the purpose of the infrastructure fund was to enhance the visual and tourism image of the Parry Sound-Muskoka region and leave it an infrastructure legacy in recognition of the inconvenience of hosting the G8 summit:

As the committee members present can surely appreciate, having a large group of world leaders and their respective delegations presents a number of significant challenges to the local population. These include dealing with the increased security, the media, and the sheer disruption of everyday life associated with this type of world-class event. The funding was intended to support projects that would enhance the visual and tourism image of the region and contribute to the successful hosting of the G-8 conference. This was not nor should it be seen as a traditional infrastructure program. It was very much a legacy to the region from the Government of Canada.

Mr. Bryce Conrad, Assistant Deputy Minister, Program Operations Branch
Infrastructure Canada, Evidence, No. 37, 40th Parliament, 3rd Session, 8:45.

Mr. Conrad then pointed out that this is a longstanding tradition of the Government of Canada as regards major international events:

Mr. Chairman, the funding granted to the region for hosting the G8 Summit is consistent with the government longstanding tradition for this type of international event, mainly: the APEC Summit in 1997 in Vancouver, for which the Canadian government invested $60 million to widen route 1 and to make improvements to the Vancouver International Airport bridge, as well as to establish the new forestry centre at the University of British Colombia; the G8 Summit in 2002, in Kananaskis, Alberta, for which the government of Canada invested $5 million under an environmental heritage fund and built a passage for wild animals in Canmore along with the creation of a University of Calgary chair in fauna.

Furthermore, in Halifax in 1995 the Government of Canada provided $300,000 for the retrofit and rehabilitation of the Bluenose schooner; $8.1 million for local infrastructure investments to Halifax and Dartmouth areas, including local roads, beautification of the downtown areas, and streetscapings; as well as a $3.1 million contribution to retrofit Pier 21, which was provided to the community as a gift after the summit was completed.

Mr. Bryce Conrad, Assistant Deputy Minister, Program Operations Branch
Infrastructure Canada, Evidence, No. 37, 40th Parliament, 3rd Session, 8:45.

In response to questions from the Committee about certain G8 infrastructure fund expenses incurred tens of kilometres from the G8 site, Mr. Conrad replied that some expenditures were not for the heads of state and their delegations but rather reflected local priorities identified by municipalities in the Parry Sound-Muskoka region:

Again, it’s not meant specifically to support the leaders and their delegations. This is very much a legacy to the region. These are all locally identified priorities from the municipalities.

Mr. Bryce Conrad, Assistant Deputy Minister, Program Operations Branch
Infrastructure Canada, Evidence, No. 37, 40th Parliament, 3rd Session, 9:05.

Just to be very clear, over 45% of the fund was allocated to three very large, significant projects that played a part in the specific holding of the summit: the North Bay airport, the G-8 summit centre, as well as the reconstruction of Deerhurst Drive.

Mr. Bryce Conrad, Assistant Deputy Minister, Program Operations Branch
Infrastructure Canada, Evidence, No. 37, 40th Parliament, 3rd Session, 10:10.

In light of this testimony, the Committee is of the opinion that, in budget documents presented to Parliament, the compensation paid to a region of Canada for hosting a major international event should be identified separately from the infrastructure expenses required to hold the event. In addition to being more transparent, presenting the information this way would allow parliamentarians to approve or reduce the infrastructure expenses required to hold the event and the compensation paid to the region hosting an event. Accordingly,

Recommendation 2:

The Committee recommends that, for greater transparency, Infrastructure Canada, in budget documents, indicate the compensation paid to a region of Canada for hosting a major international event separately from the infrastructure expenditures required to hold the event.

Impact of the summits on businesses’ sales figures and management of compensation to businesses

The costs and benefits of the G8 and G20 summits for Toronto have been raised before the Committee by the Honourable Chuck Strahl, Minister of Transport, Infrastructure and Communities. He quoted the CEO of the Greater Toronto Hotel Association as saying that this was probably the biggest event for hoteliers in a decade in terms of the number of rooms rented.

According to Mr. Strahl, the University of Toronto G8 and G20 research groups that looked at the economic impact of the summits concluded that the G20 generated about $100 million in economic spinoffs for Toronto, while the G8 generated about $300 million for the region. He also quoted Tourism Toronto as saying that the summit was expected to generate approximately $53 million in direct spending by delegates in the region for all kinds of goods and services, from food to entertainment.

Mr. Strahl also stated that there was no budget item for a G20 infrastructure fund in Toronto.

Mrs. Reynolds, Executive Vice-President, Canadian Restaurant and Foodservices Association, told the Committee that the City of Toronto has over 8,000 restaurants and 85,000 employees. She stated that the restaurant and foodservices industry employs close to 8% of those working in the areas most affected by the G20 summit. She went on to say that the G20 summit had a major impact on restaurant sales figures because of the low profit margin in the restaurant industry:

We’re an industry with very skinny profit margins, 3.2% on average. So when the industry is experiencing a major loss on one of the weekends that is typically one of the busiest of the year, it’s really devastating. It’s been four and a half months since the G-20, and our members have not received compensation yet.

Mrs. Joyce Reynolds, Executive Vice-President, Government Affairs
Canadian Restaurant and Foodservices Association, Evidence, No. 35, 40th Parliament, 3rd Session, 10:00.

Officials from the Canadian Restaurant and Foodservices Association also informed the Committee of the results of a survey they conducted, pointing out however that they did not know the statistical significance of their survey:

We prepared this survey immediately after the G-20, and respondents sometimes had operations across the city with multiple restaurants, so it was difficult for us to assess the statistical significance of the results. But the survey really gives you an indication of the impact on restaurants and about the sentiments of those business owners.

Mr. Justin Taylor, Vice-President, Labour and Supply
Canadian Restaurant and Foodservices Association, Evidence, No. 35, 40th Parliament, 3rd Session, 10:05.

The main results of this survey indicate that downtown Toronto businesses saw a 55% decline in their sales on average for the entire week, including the weekend and week leading up to the summit. Businesses outside the downtown area saw a 28% decline in sales on average. Mr. Taylor pointed out that in the restaurant sector, unlike other sectors such as retail sales, a lost sale is lost forever.

Management of compensation to businesses

The Canadian Restaurant and Foodservices Association survey indicated that 67% of respondents in downtown Toronto were aware that compensation would be paid to some business owners whose sales had dropped, and 58% of downtown restaurants stated that they intended to apply for compensation:

Well over half of the downtown respondents intended to apply for compensation, but few have done so, due to the administrative burden, the limited area eligible for compensation, and the fact that many restaurants were forced to close due to safety concerns.

Mr. Justin Taylor, Vice-President, Labour and Supply
Canadian Restaurant and Foodservices Association, Evidence, No. 35, 40th Parliament, 3rd Session, 10:10.

According to Mr. Taylor, the vast majority of Association members decided not to claim compensation since they would have to hire an accountant and a lawyer to fill out all the required forms:

The way the guidelines are written, the government is under no obligation to provide compensation, and there’s no guarantee restaurants will actually see any compensation. Also, the areas downtown that have been highlighted for compensation are very restricted compared to the areas that saw a significant decrease in business. The sentiment is that many restaurants feel disappointed by what happened and don’t feel convinced that they will receive compensation if they do apply for it.

Mr. Justin Taylor, Vice-President, Labour and Supply
Canadian Restaurant and Foodservices Association, Evidence, No. 35, 40th Parliament, 3rd Session, 10:10.

Mr. Taylor was baffled by the way the compensation guidelines were applied. For example, a business owner who decided to close down during the G20 summit could not claim compensation even if he suffered substantial damage due to vandalism.

Subparagraph 8 c) i. of the Guidelines for Payments on an Ex gratia Basis[5] provides that claims for costs for damage caused by third parties, including vandalism, are not eligible.

Appearing before the Committee on December 9, 2010, the Hon. Lawrence Cannon stated that the Government of Canada had received just over 400 claims totalling $11.6 million for both summits, 43 of which had been completed and 54 of which were at the final stage of assessment. The deadline for claiming compensation was extended to November 18, 2010:

It’s exactly the same policy…that has been used by previous governments for past summits. The eligibility period of the security perimeter and of course the external affected areas was finalized in mid-August, following close consultations between the summit management office and the appropriate security authorities, as well as the Toronto city officials. And the information, of course, was posted on the G-8 and the G-20 websites.

Mr. Lawrence Cannon, Minister of Foreign Affairs
Evidence, No. 43, 40th Parliament, 3rd Session, 8:40.

The representatives of the Canadian Restaurant and Foodservices Association made two requests before the Committee. First, the Association would like the rule limiting eligibility to certain prescribed areas changed. Second, it requested that business owners who had to close due to security concerns also be eligible for compensation. The Association representatives would also like the claims to be processed very quickly.

Section 1 of the Guidelines for Payments on an Ex gratia Basis sets out their purpose and the extent of the Government of Canada’s obligation to commercial businesses:

These Guidelines address situations where the Government of Canada may consider making Payments to Commercial Businesses, Non-profit Organizations and Individuals to mitigate adverse financial consequences as a result of Extraordinary Security Measures implemented at Designated Meetings hosted by Canada as part of its international obligations.

The Government of Canada does not have a legal obligation to provide Payment for losses as a result of meetings held in Canada.[6]

According to Mr. Taylor, the compensation guidelines were not established before the G20 but rather were finalized four to eight weeks after the summit ended. He stated that his Association had not received a lot of complaints from his members in Huntsville as regards compensation:

In fact, what we did hear from our members in Huntsville was that it actually had a positive impact on sales in that area. We don’t have survey results, but what we tended to hear from our members was that there was a positive impact in that region.

Mrs. Joyce Reynolds, Executive Vice-President, Government Affairs
Canadian Restaurant and Foodservices Association, Evidence, No. 35, 40th Parliament, 3rd Session, 10:25.

Mr. Taylor stated that officials with the Summit Management Office made an effort to remain open and to respond to questions and comments from Association members. Mr. Taylor also noted that these officials stressed that all decisions regarding the amount of compensation and the guidelines were made by Cabinet and that they did not have any power to change any aspects of them.

In light of this testimony, the Committee is of the opinion that the holding of the G8 and G20 summits shows that the compensation claims process pursuant to the Guidelines for Payments on an Ex gratia Basis could be simplified to provide greater access to those affected. Accordingly,

Recommendation 3:

The Committee recommends that Public Safety Canada work with the businesses that claimed compensation with regard to the G8 and G20 summits to find ways to simplify future claims forms and lighten the administrative burden of the claims process for future events held in Canada.

Observations on some G8 and G20 summit expenditures

After reviewing all the documentation received, some Committee members questioned the appropriateness of some G8 and G20 expenses.

When asked about the appropriateness of building a fake lake on the shores of a real lake, Mr. McGovern told the Committee that he thought this lake had been a real success:

[W]e took the opportunity to promote Canada as a high-tech, innovative society by leveraging the presence of the 3,700 media who were there. If, Mr. Chair, the member looks at the Olympic model, he’ll note that most of the provinces had pavilions in Vancouver to leverage potential investment. We did the same thing.

M. Peter McGovern, Assistant Deputy Minister, Asia and Chief Trade Commissioner
Department of Foreign Affairs and International Trade, Evidence, No. 30, 40th Parliament, 3rd Session, 10:25.

Mr. McGovern stated that the facility included more than a reflecting pond:

There was a reflecting pond. That reflecting pond was used by thousands of journalists over the course of the meeting, including breakfast television in the U.K., which wanted to do a live broadcast from Muskoka to their audience in the U.K., […] they used the high-definition images of the Muskoka region as the backdrop for their live broadcasts. It was used by countless other media organizations. It was a draw that brought journalists […]

Mr. Peter McGovern, Assistant Deputy Minister, Asia and Chief Trade Commissioner
Department of Foreign Affairs and International Trade, Evidence, No. 30, 40th Parliament, 3rd Session, 10:35.

The Committee learned that the reflecting pond no longer exists as it was filled up after the summits were over. Mr. McGovern stated that the lake cost about $50,000 of a $1 million project.

The Hon. Lawrence Cannon was asked to justify the following expenses: $20,000 for an ice sculpture, $17,955 for gift baskets, $2,500 for eight blankets, $30,000 for various G8 pens, $20,000 for 24 place settings[7] and $12,000 for tablecloths. Mr. Cannon replied that the Government of Canada had been transparent and accountable:

Yes, I’ll respond briefly, and I’ll let Mr. Chowdhury go through this. Colleagues, this is a book that has been put together. All the expenses are there. We are transparent. We are extremely transparent, and we are accountable.

Mr. Lawrence Cannon, Minister of Foreign Affairs
Evidence, No. 43, 40th Parliament, 3rd Session, 8:40.

In response to a series of questions about the $20,000 spent on pottery for 24 guests[8], Mr. Sanjeev Chowdhury, Director General, Programs, Summits Management Office, Department of Foreign Affairs and International Trade, stated that these place settings were purchased because the departments and resort did not have anything suitable on hand for an official dinner. He then told the Committee that these place settings were made by Lindgren Pottery, of Muskoka, and accordingly served to highlight the region’s crafts. Mr. Chowdhury also told the Committee that the pottery was sent to the National Capital Commission in Ottawa after the event, which will use it in the official residences for which it is responsible.

Conclusion

The G8 and G20 summits were held from June 25 to 27, 2010, and, although the Government of Canada had received all the invoices from its security partners by December 1, 2010, the Committee was unable to obtain, in mid-March 2011, the total final costs for these two events.

The Committee has made two recommendations in this report to help Parliament better examine such expenses. The third recommendation pertains to lightening the administrative burden for companies that suffer damage following events organized by the federal government. Finally, the Committee encourages the Government of Canada to publish the total final costs of the summits as soon as possible.