EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 13, 1997

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[English]

The Vice-Chairman (Mr. Robert Bertrand - Pontiac - Gatineau - Labelle (Lib.)): Good morning, everyone. I'd like to welcome everyone to the defence committee hearings this morning and I would especially like to welcome General Popowych.

Please introduce the witnesses you have with you and proceed with your opening remarks.

Brigadier General I. Popowych (Director General, Personnel Services, Department of National Defence): Thank you, Mr. Chairman.

Monsieur le président, distinguished members of the committee, let me start my presentation with a quick introduction of the senior management team that leads our Canadian Forces personnel support agency. They will assist us in the question period.

With me is Mr. Pearson, who is our chief programs officer; Gerry Haman, who is our chief financial officer; Michel Lemoine, who is the president of our retail operations, better known as CANEX; and a gentleman I believe you're familiar with, the president of SISIP, Mr. David Roberts.

In addition, I'd like to name others who may be involved in answering questions. We have a representative from the office of the chaplain general, Colonel Farwell. Would you please stand up, Colonel Farwell?

We all need occasionally, Mr. Chairman, divine intervention in our deliberations.

Equally important is a member from our finance group, the director of budgets, Monsieur René Bornais. Finally, from the group that is responsible to build buildings for us, an engineer, Colonel Bill Morton.

[Translation]

It is a sincere pleasure to appear before you today and address an important part of the spectrum on conditions of military service, namely our personnel support programs. These program focus on the physical, psychological, social and family well-being of CF members and their families. Collectively, they contribute to the morale, welfare and quality of life of military personnel and ultimately to operational readiness.

[English]

The components of our personnel support programs consist basically of the following elements: messes; physical education and recreation programs; a retail sales operation called the Canadian Forces Exchange System; an amenity program for deployed troops; personnel assistance funds; a family support program, the importance of which I believe merits an independent testimony, which will occur at the end of my testimony; and finally a life insurance program called Service Income Security Insurance Plan, widely known by its more simplistic acronym of SISIP.

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[Translation]

Most of these programs are supported in varying degrees by both public and non-public resources. Such joint funding responsibility, which to our knowledge is unique within the federal government, has proven to be the most effective, equitable and economical means of providing required services. Without non-public resources, most of our programs would be severely curtailed or eliminated or the level of public funding would have to be increased correspondingly.

[English]

This principle of joint responsibility is embodied in a Treasury Board policy, which states in part:

A reasonable level of goods, services and recreational facilities should be available to Canadian Forces personnel in their areas of service. Where those levels are inadequate, the Department's responsibility as an employer to ensure their availability where practical and desirable may be discharged through a system of non-public fund organizations.

A reasonable level, as you might appreciate, contains a subjective element and it is basically defined as what is available in a progressive Canadian community.

To give you an index of magnitude, in fiscal year 1995-96, the non-public and public contribution to personnel support programs was approximately $88 million and $56 million, respectively. These figures include costs for people, programs, operations, maintenance and capital construction.

Gentlemen, at this time I would like to make reference to some slides, for which you have pie charts at the end of the text.

[Translation]

You can refer to the pie charts.

[English]

I draw your attention to the first one, entitled ``Non-Public Fund, Public Contributions''. It gives you an idea of from where the money is coming.

[Translation]

Of the $88 million in public funds, $54 million is in direct support of military operational requirements such as fitness training programs, staff and facilities, support for families of deploying members and for amenity services in operational theatres. The remaining $34 million is the public contribution to the shared public/non-public fund costs of our personnel support programs.

[English]

The second chart, entitled ``Sources of Non-Public Funds'', shows you, as the title suggests, where the moneys are generated.

[Translation]

The main sources of non-public funds support are the $10 million in profits from CANEX and base non-public fund resale operations, a $3 million contribution from the service income security insurance plan, $9 million in revenue from investments and $1 million miscellaneous.

[English]

``Other sources'' basically refers to revenues generated in UN or domestic operations.

The policy governing the public and non-public shares of the costs for personnel programs is specified in a Canadian Forces publication approved by Treasury Board. Public versus non-public responsibilities may be summed up as contained in about a three-inch document, and here I attempted to capture the essence.

The public is responsible for 100% of the funding for the following: fiscal education programs in support of military training, which include staff equipment facilities, such as gymnasiums, indoor pools, arenas and sports fields; it also supports totally deployed forces and the military family support program.

What is shared in varying degrees between the public, between the taxpayer and non-public funds, is the provision of municipal-type community recreation programs and facilities, such as community centres, tennis courts and messes, and non-public funds accounting and management services. At the other end of the spectrum, non-public funds underwrite in total specialty interest recreation activities, such as golf and curling.

[Translation]

We are currently conducting a comprehensive review of our personnel support programs, facilities and financing sources. Our intent is to ensure that our personnel support activities and facilities are capable of supporting, in a cost effective way, a sound quality of life for our people in order to maintain an operationally ready armed force well into the future. While time precludes a full description of our specific programs today, I am confident that the current programs contribute significantly to the quality of life. I hope that you will share this confidence during you forthcoming visits to Canadian Forces bases.

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[English]

Gentlemen, as you conduct your visits, you should note the age of our personnel support infrastructure for that is indeed our central issue. Most of what is the public responsibility was built following the Korean War, as was much of the other infrastructure on our bases.

Like our operational and training infrastructure, our personnel support infrastructure needs an influx of recapitalization funding to bring them up to modern standards or replace them with modern facilities. Indeed, most of the existing facilities were never designed to accommodate the level of military fitness training with mandatory testing that they now support; nor were they built to accommodate women in the forces nor to support military families. Hence the investment decision to refit existing facilities or to build new facilities needs attention.

[Translation]

The problem has been exacerbated since the 1994 federal budget not only because we have moved more people to fewer bases with little increase in personnel support facilities, but also because our existing system of funding major construction was not considered suitable in an era of drastic reductions in all departmental programs.

For example, prior to 1994, there was a system of assigning priorities to personnel support, that is quarters, messes and so forth and to physical recreation and training facilities so that they did not compete head to head with new construction projects in support of operations.

This system allowed the department to proceed with a modest level of investment in those types of facilities, an investment in the order of 5% to 7% of the total annual departmental recapitalization effort.

It was never enough but, in competition with the maximizing of funds to meet Canada's operations needs at home and overseas, it was all that could be afforded and it was something.

Since 1994, however, all personnel support construction has been set aside except that which was under way at the time. As a result, the level of funding has fallen to only 3% of the department's recapitalization program. Clearly, this is not sustainable and will need to be changed.

[English]

Along with the underfunding of personnel support facilities prior to 1994, it was an aim of the department to draw more on the surrounding communities. Since the government was paying grants in lieu of taxes, the Department of National Defence was entitled to use certain municipal facilities where they were available. We also embarked upon some projects that were direct partnerships between the Department of National Defence and the local community, for example, the arena built in Calgary.

Canadian Forces non-public funds have also played an important role. Since 1986, gentlemen, $22 million of non-public funds have been spent to construct facilities that are otherwise a public responsibility. Recent examples include arenas in Bagotville, Esquimalt, and Edmonton, with additional facilities planned for Valcartier, Borden, and Trenton.

While these efforts have resulted in some modest success, there is little doubt that the overall standard of personnel support facilities available to military personnel and their families across the Canadian Forces has not kept pace with those normally available in Canadian communities.

[Translation]

To chart the course for the future, we are currently conducting on-site assessments of our personnel support facilities across our bases. This study, which will determine requirements, will be completed in about a month's time.

Our preliminary estimate indicates that we will need between $120 to $150 million to bring our personnel support infrastructure up to an acceptable standard. It is our intention to offer $75 million of non-public funds against that total. Hopefully, departmental priorities will allow the public to contribute the rest.

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I would also like to draw your attention to a complex of personnel support facilities recently completed at garrison Edmonton. Public and non-public funds have been used to provide a contemporary personnel infrastructure which may be viewed as a future model for other Canadian Forces bases.

[English]

To conclude, Mr. Chairman, members of the Canadian Forces and their families need and deserve the best personnel support facilities we can provide. Now that we have completed the closure of our major bases, and as we are entering a period of relative stability, it would be a propitious time to resolutely engage in a get-well program that will improve the quality of life and contribute to operational effectiveness.

We are confident that with increased commitments from public and non-public sources of funds a much-needed recapitalization could be completed within five years.

Your independent assessment will be of primordial importance to any commitment to recapitalize our personnel infrastructure. This will add much-needed substance to what is philosophically espoused: that people are our most important resource.

[Translation]

Mr. Chairman, that concludes my presentation.

The Vice-Chairman (Mr. Robert Bertrand): Thank you very much, General Popowych.

We will now proceed directly to questions.

Mr. de Savoye.

Mr. Pierre de Savoye (Portneuf, B.Q.): General Popowych, thank you for a very interesting presentation.

At the outset, you identified for us the various personnel support program components, namely the mess, education programs, retail activities, amenity programs, the assistance funds and family support programs. You also mentioned that more would be said about this in another presentation.

For your information, a number of CF members live in my riding of Portneuf, which is located next door to the military base. The base is located in Charlesbourg, but as soon as you exit the gates, you find yourself in my riding.

Military personnel who avail themselves of my office's services do not really have any complaints about the mess, physical education programs or other areas, but rather they seem to exhibit problems related to stress, isolation or prolonged absences from their families. Personnel stationed in Valcartier have frequently been assigned to peacekeeping missions. Alcoholism is also a problem.

Will all of this be covered in another presentation?

Bgen Popowych: Yes. Mr. Jamieson who will speak next is going to talk about our family support programs.

Mr. Pierre de Savoye: I will likely have more questions for Mr. Jamieson than I will have for you.

Bgen Popowych: I want to assure you that we do have programs in place to deal with stress. We also have programs that are designed not to treat alcoholism as such, but to help people.

Mr. Pierre de Savoye: I will get back to this subject with Mr. Jamieson.

On another note, you mentioned that you have also embarked upon some projects in direct partnership between the Department of National Defence and the local community. You gave as an example the Calgary arena.

Bgen Popowych: Yes.

M. Pierre de Savoye: Obviously, I am perhaps more interested in what's happening in Valcartier. An arena is being planned for the base in Valcartier, although there is still some availability in Val-Bélair.

Could you tell me which broad principles guide the department when it comes to deciding whether to establish partnerships with local communities?

Bgen Popowych: Before a decision is made to build a facility, we examine the problem. We determine the requirements. In this particular instance, Valcartier was singled out.

In the course of our analysis, we looked at ice availability and existing resources in the cities and towns in proximity to a particular base. For example, if there is a need for an arena, it is not critical that it be built on the base per se. We operate on the principle whereby if a site is available in the area surrounding the base, then that is the site we select.

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We often encounter problems when we enter into contractual agreements with towns. Many times, these arrangements work out well, as was the case with the Calgary arena and the social centre in Cold Lake. In other cases, problems do arise.

The local commander must prove to us that there is a need for a facility before it can be built on a base. His analysis must be based on economic considerations. Is it better to build or to lease a facility? In essence, when business people manage an arena, their objective is to turn a profit, a totally legitimate and justified goal. The local commander analyzes all of these factors.

Often, minor hockey leagues use the arenas during the evenings. These facilities are used for all types of activities.

We did encounter a problem in Bagotville where engineers had condemned the arena for being unsafe. For a period of about ten years, air force personnel stationed in Bagotville had to travel to a small town located 15 kilometres from the base to use ice which was only available between 11 and 12 o'clock at night. Therefore, cost and availability are just a few of the factors considered during the analysis.

Mr. Pierre de Savoye: You can understand that using public funds to provide military personnel with these kind of facilities is certainly a major concern. However, at the same time, the perception of the public living in close proximity to a military base is an important consideration.

The public's perception, and I have witnessed this, is that military personnel enjoy facilities that could also be used by the general public. Quite frankly, in my own region, some municipalities feel that more could be done in terms of sharing base and municipal resources.

I understand your explanations and I understand also that in the case of arenas, ice may be available only at odd hours. However, this also applies to the general public. Some young people must get up at five in the morning to get ice time and some people work during the day and play hockey at 11 o'clock at night.

I think it would be useful for the committee to know what guidelines base commanders must follow in dealing with the neighbouring community, to ensure that perceptions are properly handled and this synergy maximized. Would it be possible for you to share this information with the committee?

Bgen Popowych: Certainly. We encourage our bases to take as active a role as they can in neighbouring communities.

As I explained, military resources are national resources. Admittedly, priority is given to military personnel, but when facilities such as arenas and gymnasiums are available, they can also be used by civilian personnel. In fact, this is one of our basic principles.

In the case of Valcartier, we need to examine how this policy is being applied.

Mr. Pierre de Savoye: Could you tell the committee what guidelines your commanders are required to follow?

Bgen Popowych: We will supply you with copies of our guidelines.

[English]

Mr. Jack Frazer (Saanich - Gulf Islands, Ref.): General Popowych, welcome. We're very pleased to have you with us today. And thank you for your presentation.

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I think I'd like to start by saying I very strongly support your ultimate statement in your address that people are the most important resource the armed forces possess. It strikes me that perhaps the government in their cutting of armed forces budgets over the years have ill-served those people, because in fact, as you mentioned, a substantial part of what should be public facilities are in fact provided by non-public funds.

My question is what have the armed forces done to draw this, what I consider to be a failure to provide adequate equipment or facilities, to the attention of the minister and thus the government?

BGen Popowych: We have been pragmatic, Mr. Frazer. As I explained in my address, the whole public funding question, the whole question of the defence budget, was such that the senior leadership were caught in a very difficult situation. They were required to handle trade-offs between people and equipment and operations and maintenance. There's not enough to cover everything.

Superimposed on all that are immediate imperatives. Since the 1994 budget, we had to consolidate bases. Operational units, combat units, were being moved to bases and being consolidated. Air force squadrons moved, army combat units moved.

The immediate imperative is to house that. So operational facilities had to be the number one priority. The number two priority is of course the follow-up training facilities. Regrettably, the imperatives of the moment were such that very little could be assigned to people matters. The senior leadership knew this and consciously made that decision.

We had no other alternative to spending more NPF dollars. We were not going to get an additional cent from the government, and it was unrealistic to do nothing and wait for manna to drop from the heavens. The leadership knew it, and knows it, and has dealt with it.

Insofar as we have different ministers, Mr. Frazer, you would appreciate that our recent minister is aware of this. And part of the reason the committee exists indeed reflects his commitment to not only recognize the situation but to attempt to do something about it.

Mr. Jack Frazer: I appreciate that, and obviously that is why were are convened on this committee to address those problems. But I guess what I wanted was some background as to what has been done prior to this, because without adequately trained people, fit people who can do the job they're required to do, we're really wasting our money in defence. In regard to the points you've made, obviously housing and equipment is vitally important as well, but the most important part is the people. If we don't look after them then I think we are not getting full value for the money we invest in defence. And let's face it, it's $10 billion. It's a lot of money.

BGen Popowych: You look at people from the broadest aspect, Mr. Frazer, when you're talking about matters such as compensation and benefits. When we talk about people we have to take a look at the whole picture, and this is one element of it that we're addressing today. What the government has done about it.... It has frozen compensation. We're not in a position to comment on that. That's government policy.

We've attempted to deal with the doable, through the use of NPF funds.

Mr. Jack Frazer: I understand, that and I think perhaps a lot of people forget that service personnel are taxpayers as well as people who are paid by the service.

Could you help me out a little bit and expand on just what you provide in your family support program? I'll tell you where I'm going on this one. I have a concern because at the time I was in the service the units that were receiving incoming personnel used to assign a sponsor to them and say all right, you're now looked after within the unit by this individual, and I'm concerned that in our effort to provide a reception for people we're going to the impersonal and bureaucratic, saying there's an office on the base that's going to look after you. Thereby, you don't engender that type of unit cohesion I think is so vitally important to an operational unit.

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BGen Popowych: I will answer in general terms, but I'm pleading for a little bit of patience because Mr. Jamieson will address that.

Let me assure you that the family resource centres are run by spouses, and they complement what assistance is provided by the units. They work together to assist families. I hope you're satisfied with that general answer, Mr. Frazer, with the knowledge that Mr. Jamieson will cover that.

Mr. Jack Frazer: Unhappily, I'm going to have to proceed but my colleague will be here at that time.

You mentioned a $120 billion to $150 billion shortfall to bring facilities up to standard. Is part of that looked after in future budgets or is that something that's outstanding?

BGen Popowych: Here's the process, Mr. Frazer. As you and I are speaking, we have a team of engineers and experts from my staff going across the bases doing an assessment of the quality and quantity of all our facilities. From our own information we have a rough estimate of $120 million to $150 million. In a month's time we will have precision on the numbers.

That money has not been budgeted. What we do have is a long-term capital program worth$1 billion, and that deals with construction for operational facilities, training facilities, and personnel support facilities. So there is a budget of $1 billion.

What the department will have to do, should they agree with our definition of requirements and with our financing approach, is to come up with roughly $50 million of public funds. They will have to decide how they are going to reprioritize this departmental construction budget of $1 billion over five years. It will be a question of priorities. Something will have to drop off or at least be delayed from that list to accommodate higher priority personnel facilities, but that is a decision the senior leadership will have to consider.

Mr. Jack Frazer: With the assignment of more fiscal responsibility to the base commanders in that they have far more ability to manage their base budget now, do you foresee that this will improve...? For instance, I visited Cold Lake recently and it seems to me that the entire community - Grand Centre, Cold Lake, and the base itself - is cooperating to try to provide better facilities for the whole area. It strikes me that with the base commander's increased ability to manage his budget and to reap the benefits of wise fiscal spending, this can enhance things. Do you share that view?

BGen Popowych: Mr. Frazer, you are hitting at an issue which is central not only to an armed force but to any business. What do you centralize and what do you decentralize?

You have outlined, quite rightly, the positive aspects of decentralization. In other words, we are matching authority, responsibility, and accountability. A base commander, who is charged to meet his mission and take care of his people and who is responsible for morale, ought to have full discretion. He will decide what dollar will go into operations and into people and into buildings. That is quite true.

Mr. Jack Frazer: So you support that?

BGen Popowych: Philosophically I support that. In reality, the harsh reality of the day is that you have to wonder sometimes if that's the right way.

This is what we really do. We at the department get a budget and we say to the base commander here is your money. By the way, we got less. You are not getting enough for what you need and don't bother us with your explanations. Here is your mission and your money; go away and get on with your business. What do you think a normal base commander would do, a normal garrison commander? Where is his first priority, normally?

Mr. Jack Frazer: People.

BGen Popowych: No, sir.

Mr. Jack Frazer: Operations, I guess.

BGen Popowych: Operations. It would take someone with incredible foresight and commitment. I'm not saying that those who don't don't have that, but if you're a base commander for two or three years you're going to be rated on how you meet your operational mission. For the buildings you want, they will reap the benefits two, three, or four years later, as will the future generations of the military who go there. It's a tough issue.

Mr. Frazer, let me assure you that I'm not blaming anyone here. All I'm saying is that when you evaluate the pros and cons of decentralization and centralization, there are some very difficult issues. When you put a base commander in a position where you say, Mr. Base Commander, you now have the privilege of determining which hand you're going to cut off, left or right, it's not easy.

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Mr. Jack Frazer: I'll just close, Mr. Chairman.

I understand fully what you're talking about. I just think that there is an undeniable connection between the welfare of your personnel and your operational ability to do the job. If you ever forget that, then you may do all right operationally this year, but next year, you are going down the tubes, pal, because it won't last forever.

So I think we have to address that, but I do believe that the present decentralization of fiscal authority is a step in the right direction. It puts the ability to make decisions closer to where the decisions are going to have an effect.

Thank you, Mr. Chairman.

[Translation]

The Vice-Chairman (Mr. Robert Bertrand): I have several questions for you, General. When you mentioned the components of the personnel support programs, you mentioned the messes. I am not familiar with the military system. Who is entitled to use the messes? All base soldiers?

Bgen Popowych: I don't understand your question, sir. What exactly is it you wish to know?

The Vice-Chairman (Mr. Robert Bertrand): You mentioned the components of the personnel support programs. On page 1 of your document, you talk about messes. If I understand correctly, that is where meals are served. Is that correct?

Bgen Popowych: yes.

The Vice-Chairman (Mr. Robert Bertrand): Is everyone entitled to use these facilities?

Bgen Popowych: All Canadian Forces members must belong to a mess. Basically, there is a mess for officers, one for junior officers and one for sergeants and warrant officers. Military personnel are entitled to eat there, although they must pay for their meals.

The Vice-Chairman (Mr. Robert Bertrand): How much do they actually pay?

Bgen Popowych: It varies from base to base. The cost factor comes into play.

[English]

The Vice-Chairman (Mr. Robert Bertrand): A ballpark figure.

[Translation]

Bgen Popowych: Breakfast cost $2 or $3. Lunch can run anywhere from $5 to $6. The same goes for dinner.

The Vice-Chairman (Mr. Robert Bertrand): Early on in our proceedings, we were informed that a young soldier earns between $14,000 and $15,000 a year, if my memory serves me correctly. If his meals cost him this much, he doesn't have a lot left over for other activities. Must he also pay for his accommodation?

Bgen Popowych: Yes. Normally, when a young soldier lives on a base, he pays a flat rate which covers food and lodging. If you ask me how much this is, I would say that it is slightly less, since lodging and food are included. When young soldiers are deployed in the field, they do not pay for their meals.

The Vice-Chairman (Mr. Robert Bertrand): They only pay for meals when they are stationed on the base.

Bgen Popowych: That's correct.

The Vice-Chairman (Mr. Robert Bertrand): Could you explain to us what CANEXs are ?

Bgen Popowych: The CANEX is somewhat like a small local convenience store where Canadian Forces members, reservists and public servants who work for the Department of National Defence as well as their families can shop.

The CANEX in Edmonton is located in a small plaza and you can go there to buy ordinary items at competitive prices.

The Vice-Chairman (Mr. Robert Bertrand): At competitive prices?

Bgen Popowych: Yes.

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The Vice-Chairman (Mr. Robert Bertrand): Why bother if they can purchase various items at competitive prices? They could just as easily go to the local Becker's.

Bgen Popowych: They shop there when they can.

[English]

Mr. Jack Frazer: It's a convenience store.

[Translation]

Bgen Popowych: That's right. In Edmonton, the base is located approximately 7 kilometres from town and is home to a housing complex. If a young mother needs milk or bread, she can go to the CANEX store for supplies.

Also located in the plaza is a fast food outlet where young people can go to eat, as well as a hairdresser and an electronics store where people can purchase television sets, radios and so forth.

What do you suggest we do, Mr. Bertrand? That is the problem. We must provide a service to Canadian Forces members and at the same time ensure a source of revenues. Our prices must be competitive in order to attract customers.

The Vice-Chairman (Mr. Robert Bertrand): I would like to ask one final question, if I may. With respect to the life insurance program, known as the military life insurance plan, what is the amount of the death benefit provided?

Bgen Popowych: I will turn that question over to the president.

[English]

What is the death benefit?

Mr. W.D. Roberts (President, Service Income Security Insurance Program, Department of National Defence): You have to remember, Mr. Bertrand, that except for the long-term disability part, the program is completely voluntary. We're just another insurance company from their perspective. They can purchase anywhere from $10,000 to $400,000 worth of life insurance on the life of the Canadian Forces member or the spouse. It's very much dependent on what the individual's needs are and what they want.

The Vice-Chairman (Mr. Robert Bertrand): But if he is sent out to Bosnia, for instance, he is covered by another compulsory life insurance given by National Defence, I presume.

Mr. Roberts: The supplementary death benefit is part of the Canadian Forces Superannuation Act legislation. That's automatic for every Canadian Forces member, and that's twice the individual salary.

That has nothing to do with me. What I have is the group insurance plan, which makes available to Canadian Forces members and their families life insurance coverage in addition to what is required on a compulsory basis. Right now I have 91,000 term insurance clients.

Mr. John O'Reilly (Victoria - Haliburton, Lib.): Thank you very much for attending, Brigadier-General Popowych.

I'm still trying to get a handle on who made the decision that the base commander decides the overall spending of the budget on the base. Is there not a planning part that decides what that base needs? Are you sending people out right now to evaluate the needs of all the bases? I don't understand the overall direction from headquarters versus what the base commander wants. Who decides whether you have to put up a new building or tear down an old one? Are you telling me that's the base commander's decision and not headquarters' decision?

If that is the case, I disagree with that direction. I would think that like any infrastructure program, you need an overall plan to bring everything up to standard. I was concerned with the base commander deciding how all the money is spent. Did I misinterpret that?

BGen Popowych: I'm going to tie this in with what Mr. Frazer was raising before.

You are both correct. In essence, the base commander does not unilaterally decide willy-nilly what he has to do.

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The nature of your question, Mr. O'Reilly, now deals with the whole defence budgeting process. In its essence, a base commander determines his requirements. They go up the chain. There are various committees in the ministry that I won't bore you with that decide priorities and then make approvals based on what has flowed from the bottom and on the funding availability.

From the top comes the general funding, and that is given to the base commander. The base commander or the wing commander, at the moment, determines how that money is going to be allocated. It's going to be allocated between operations, people, maintenance or construction. If it is a major construction - say you're talking about an arena that's about $2 million - then that has to be known and approved by national defence headquarters.

For example, on those we bill from NPF money, it has to be personally approved by the NPF board of directors, which is made up of commanders. So there are controls.

Mr. John O'Reilly: We had this problem with leaving footprints in the last study. I pretty well had that word eliminated, much to Mr. Frazer's delight, because the footprint is something that somebody leaves after they've gone.

In the consultation process in base closings, was that done by the military or by politicians? If you're given an overall budget, were the base closings on the recommendations of the Department of Defence or was it the Minister of Defence?

BGen Popowych: The process in its essence is that the ministry, the department, is given some indication of what sort of funding will be available. It is then up to the department, including the armed forces, to determine how they're going to live with it. The department, the ministry, does the analysis of various options, and that is given to the political authorities. Ultimately, it is the cabinet that decides.

Mr. John O'Reilly: But the consultation process comes from the military.

BGen Popowych: Absolutely. We do the analysis.

Mr. John O'Reilly: I want to go to a specific example and maybe try to draw a conclusion as to how this happened, other than just poor planning or whatever. Most construction work done on bases does not require a permit from the municipality that it is in or adjacent to. As a result, the bottom line is more important than the quality of the product.

So you end up with uninsulated housing quarters that are impossible to heat or cool and a big monolithic construction sitting in Goose Bay that nobody can live in. I don't know if anybody ever lived in a huge apartment complex that I drove by. I asked what it was, why the windows weren't in it, and so forth.

I have to look at that and wonder what kind of an engineering process it was. Who would decide to go ahead without the proper testing and construction materials and an overall very shoddy, poor design?

Taxpayers look at that and say to us -

Mr. John Richardson (Perth - Wellington - Waterloo, Lib.): That's an American building.

Mr. John O'Reilly: Oh, it's an American building. Well, that's even worse.

Some hon. members: Oh, oh!

Mr. John O'Reilly: I got hell for it. A member of the defence department was asking about it.

BGen Popowych: We should give you a response to your very valid question, Mr. O'Reilly. I will turn to Colonel Morton to address the issue you raised.

Colonel W.E. Morton (Director General, Infrastructure, Department of National Defence): Thanks very much for the opportunity to address that.

To start off, it is an American building in Goose Bay, but let me go back to address the whole question of how the engineering is done and what standards we use, and so on.

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I certainly take complete and absolute exception that we're building shoddy buildings. I absolutely take exception to that. We have a system where we determine the need. Generally speaking, that's determined by the operators. The need is then evaluated by our internal engineering branch. We establish an approximate price. That is then approved within the department, and if necessary by the minister and Treasury Board.

Then we hire a consultant. The consultant is a qualified, licensed architect or engineer, depending on the product. He delivers a design that is very carefully reviewed to make sure it is compliant with all the existing codes, such as the national building code, the energy requirements, the environmental requirements, and so on. It is very carefully reviewed. Then it is tendered competitively. In between, there is a refined estimate, and we get a subsequent approval on a substantive estimate.

The competitive bids are received. We deal with the highest-quality contractors. We have very rigid site supervision. We build buildings that I would put up against any buildings built in Canada today.

If you're asking me whether the married quarters built in 1948 stand up to the standards of Canadian housing built in 1996, no, of course they don't. But they stood up to the standard of their time. In fact they were the leader of their time in 1948. The buildings we're building today meet their standards now.

We are trying very hard to keep our costs down. We have adopted some streamlining processes like design and build. Our internal auditors have recently reviewed our new method of programming. They determined that they were providing completely satisfactory quality in a shorter time and in very competitive situations.

I have recently spoken to the Royal Association of Architects of Canada about how we are processing our construction program. I received several laudatory remarks about how our program was progressing. In fact I was invited back to speak at a series of regional forums across Canada and in fact an international forum in June in Montreal. So I think I can say here with a certain amount of pride that the construction standards and the quality and progressiveness of the military construction program is one that I would put up against any other in Canada.

Mr. John O'Reilly: I'm glad you answered that, but I still maintain that the married quarters in Goose Bay have never been brought up to standard. They have single-pane glass, and with the siding on them, they're impossible to heat or cool. I know the officers all live in nice bungalows with brick facing on them. I'm asked that question, so I pass it on.

Col Morton: I think the recapitalization of infrastructure is of very great concern to the department. You've heard from General Popowych about the recapitalization of the personnel support infrastructure. It's a problem that exists across the Canadian forces, and it's something we are trying very hard to address.

Married quarters, in themselves, are a bit of a separate problem, but the problem is in effect the same. The married quarters were built largely in 1948, with some exceptions since then. We have something like 17,000 or 18,000 of the things that we have to replace. They're now all 40 years old, and they've had substantial money put into them. I would argue that they have had substantial money put into them but that probably it wasn't enough.

But we are going to face - we're facing it right now - a problem of how to recapitalize the infrastructure that's now approaching 40 years old, which is what was built after the war, and 50 years old, which is what was built during the war. So it's going to take a really concerted effort.

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The married quarters in Goose Bay are a bit of an exception in that they did not belong to the department for quite a number of years. When Goose Bay was reorganized, which was probably in 1988 or so, they came back into the department, and we've been working since then. Not all of the ones in Goose Bay, by the way, belong to the department; some still belong to Public Works.

I believe you're visiting Edmonton. You'll see a range of married quarters in Edmonton. Take the ones in Griesbach. We're closing Griesbach, so we haven't invested in them recently. But you'll see that married quarters in Griesbach are in bad shape and require a huge amount of money.

We're right now looking at how you recapitalize those married quarters. In my view, the right answer is that you build something new. We're hoping we can build in some sort of arrangement with private industry so that the department doesn't get caught all at once in this need to recapitalize all the married quarters we're caught in now because we built them all in 1948.

It's going to be a real challenge as to how we do that. I certainly don't want to leave the impression that all our things in construction in infrastructure are good. That's far from the case, but I would again reiterate the point that when we do these things, we do them to the highest building standards and, I would say, business standards. That's certainly our business.

Mr. John O'Reilly: Thank you.

The Vice-Chairman (Mr. Robert Bertrand): We now go to the five-minute rounds.Mr. Grubel, you had a question.

Mr. Herb Grubel (Capilano - Howe Sound, Ref.): General, I'm normally in the finance committee. I'm just helping out here, so my questions are going to focus on finance.

Following up on Mr. Bertrand's question on this CANEX organization. Is this run at a subsidy? In other words, is the cost of goods and personnel larger or smaller than the revenue obtained by the sale of the product?

BGen Popowych: There's generally no subsidy.

Mr. Herb Grubel: No subsidy.

BGen Popowych: It's run as a business.

Mr. Herb Grubel: Is there a profit?

BGen Popowych: Yes.

Mr. Herb Grubel: In the numbers that you have given us on the expenditure for these purposes, is this the gross revenue of the sales, or is it a part of the...? Do you see what I'm driving at?

BGen Popowych: Are you referring to one of the pie charts?

Mr. Herb Grubel: Yes. You mentioned it in the text as well. Let's say there's $144 million of revenue. Would the profits from these kinds of operations be part of the revenue, or is the revenue the total sales of the stores?

BGen Popowych: Take, for example, the $56 million of NPF. I refer to the one with the slide with the $56 million. Let me go very quickly. There's $10 million in resale profits. That's in blue. That's clear profit.

Mr. Herb Grubel: So that's clear profit.

BGen Popowych: Right. The $20 million, which is in pink, is user fees, period. That would, in an ideal world, not be profit because from that we have to pay salaries and so on. That's revenue.

Memberships are the same. The $13 million is pure revenue from membership. Part of that goes to underwriting costs as well.

As for investment revenue from that, we have to pay out program costs. Part of that goes to paying our staff and the costs of running the program. Also, part of that goes for construction. The contribution from my insurance plan would in fact would be clear profit.

Mr. Herb Grubel: Let me just say this as a sort of general criticism. This seems to be like mixing up apples and oranges. I find it not particularly satisfactory.

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I'm sorry, this is in French and these are technical words in French that I don't fully understand. But the thing is I would like to see what is the net cost to the taxpayer of some of these operations or the expenditures that are being made. You can't say that sources of non-public funds.... What was the $10 million again? That's resale profits. Okay. User fees...investment revenue...but then you threw in something about how you can't take the $13 million because there are some expenditures that have to go in in order to run this and the membership.

BGen Popowych: I will let my chief financial officer deal with another financial officer, if I may.

The purpose of these slides, if I may give you an indication, is that these are not financial statements in a classical way. We have all sorts of financial statements and they're available. All this says is where our money is coming from on NPF, where it comes from. That's all this answers.

Mr. G. Haman (Chief Financial Officer, Personnel Support Programs, Department of National Defence): Your question is not related to this slide. As the general said, this only explains the source of NPF and that's all. So where do we get our money to pay for the programs?

If you're talking about the taxpayers' share, you have to look at the other slide. We have a slide showing that $144 million, $56 million of which is the NPF portion, what NPF puts in, and the remainder is what the public puts in. Of this, $34 million is in shared programs and activities and $54 million is in pure public responsibility, like physical fitness and the like.

Mr. Herb Grubel: I have one last question, please, and it concerns the disposition of the abandoned bases. What are the plans on that? And would it be possible to use some of the revenue from the sale of those bases in order to finance some of the capital construction on the new ones?

BGen Popowych: Indeed, it's a very good question. It has happened. Edmonton is the latest case. If you go to Edmonton, you will notice modern facilities being built. They're not fully completed, but they're being built. Part of the funding came from the sale of public assets, lands. So your idea is in fact in effect.

On the non-public side, which is my responsibility, what would happen if tomorrow we built an arena worth $3 million and the next day the government closes the base? Have we lost the $3 million? What do we do? We've agreed with the Treasury Board that in cases of base closure we will get for the public the depreciated value of our real estate assets.

Mr. Herb Grubel: And obviously you're pleading here for more funds, or your description that they're not sufficient suggests the revenues raised from the sale of depreciated assets on abandoned bases is insufficient to add whatever and upgrade whatever is necessary on those where we now concentrate our forces.

BGen Popowych: Whether the public source of funds comes from getting bigger revenue from the sale of our NPF assets or a simple reallocation of our existing budget is almost a moot point.

Mr. Herb Grubel: From the budgetary point of view or from the overall pont of view?

BGen Popowych: As long as we get the public funding is my bottom line. As to where it comes from, surely if a piece of real estate has a high market value we would get a proportionately fair share.

Mr. Herb Grubel: Could I ask one last question? It is just accounting stuff, I'm sorry. But let's say the government says in the budget I always look at in the finance department that expenditures for the Department of National Defence are $9 billion. The revenue raised by the sale of assets on abandoned bases - is that in addition to the $9 billion or is that part of the $9 billion?

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BGen Popowych: Either our individual from the directorate of budgets, René Bornais, or Colonel Morton, either one of you.

Col Morton: We are presently in the second year of our sale of bases. Last year, in our long-term capital plan on construction we submitted a series of projects that were required in order to allow us to adjust our infrastructure because of property we wanted to sell.

The one I'll use as an example was Griesbach, which is the army base south of where the army now is. We had to move some facilities off the Griesbach property in order for the property to be freed for sale. We did that using the crown's money and we're now presently constructing those facilities in Namao. Included in that is the field house associated with the gymnasium, which is a personnel support building. We also put some money into the base headquarters and several other things so we could leave the Griesbach property.

Of course the property has not yet been sold, and we are now dealing with Treasury Board as to what rate the money from the sale of properties returns to the department. The principle is 50% of the revenue from sale of property will return to DND and 50% goes to the central treasury.

In order to do that, you have to invest up front. So it's getting the up-front money that's causing us the problem at the moment. NPF and their assets are part and parcel of that, and eventually the money will return to NPF, but of course that will be years downstream.

Mr. Herb Grubel: I would like to summarize this. Correct me if I'm wrong. You get your $9 billion -

Col Morton: Yes.

Mr. Herb Grubel: You will have additional funds available for spending, which is 50% of the revenue generated by the sale of bases after they have been fixed up so they could be sold.

Col Morton: That's correct.

Mr. Herb Grubel: This is then expenditures that are not going through the budget, as conventionally they do.

Col Morton: It is an adjustment to what they call the ARLU, which is the annual reference level update. So it is an adjustment to the budget.

Mr. Herb Grubel: I see. The $1 billion that was promised to the projects you're concerned with in your introduction for the longer run would come out of the $9 billion?

Col Morton: That's correct.

Mr. Herb Grubel: Whatever revenue is raised by the sale would be play money - or would the $1 billion be reduced by that amount?

Col Morton: I'm sorry, let me correct myself. The $1 billion is over five years, so the money then over those five years consists of money that comes out of the annual allotment, the $9 billion that you're talking about plus the money that comes out of the sale for property. The $1 billion includes revenue from projects that are being funded by revenue from the sale of property, plus projects that are being funded out of the $9 billion. So they're both included in that $1 billion five-year figure.

Mr. Herb Grubel: Okay. There aren't any additional expenditures beyond those that are in the budget financed out of the sale of the revenues? There are no such additional expenditures?

Col Morton: No. Everything -

Mr. Herb Grubel: The upper limit is $1 billion and now the question is how it's financed.

Col Morton: Yes.

Mr. Herb Grubel: The more sales there are available, revenues from sales of assets, the smaller will be the burden on the current operating budget. Am I correct?

Col Morton: That is correct.

Mr. Herb Grubel: Thank you very much. That was a very helpful clarification. I'm sorry I took so long.

The Vice-Chairman (Mr. Robert Bertrand): That's okay.

Mr. Richardson.

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Mr. John Richardson: Thank you very much, Mr. Chairman. I'd like to thank the group for coming today.

What we're faced with in our discussions here, and through your handout, is a problem of facing up to some form of sustainable development that you can rely on for the long term. I think Mr. Grubel touched on it, the two sources of funds you're operating with now are the public funds. I don't like the idea of the non-public funds having to be used to build capital facilities. That has historically been the purview of the defence department to get to its capital funds through the budget. I think it's coming down a long way that we have to dip into the non-public funds to the extent we are. However, it is nice that this source is available to fill the gap that's not being met.

The physical, psychological, and social aspects of what's happening in the forces is directly related to some government decisions, but also the quality of life on the base. The quality of life can be reflected in the material end of it at the homes, the recreational facilities, the access to buying goods on base that are priced competitively and easy to get at. I think all these things are part of the high morale.

Griesbach isn't the only base that has bad.... I can remember when it was built. I can remember being at prairie barracks and waving goodbye to the Patricias as they thought they were moving into a great spot. I was with the Queen's Own Rifles and the Strathconas and we stayed behind. We stayed at the best spot. Everyone envied they're moving the depot there, and everything went up there. I just think it was moved too quickly and it wasn't a well-thought-out base. I think it was one of the few that was built on this model at the time.

That being said, you have all kinds of albatrosses around your neck as you move. To achieve that sustainable development we must develop some flexibility within the global budget as passed by the Parliament. But you own assets out there that are convertible into collateral for loans, which you should be able to operate from, because all of those properties we own across the country, much of it PMQs, is attractive. If it is sold off or not sold off then it should be allowed to loan against it to upgrade the facility so that the living conditions for those people in the armed forces are equal to those you'll find in the surrounding communities.

I don't know how we can accomplish this, but certainly some form of management of the asset in a manner that's more business-oriented.... You should be able to go and borrow a mortgage on some of that for upgrading, and the mortgage should be paid down by the income from the facilities being rented by the people of the forces.

I can imagine the headaches people who are in property management have trying to get funds when you have a pool out there of considerable millions of dollars that could allow you to do a good business practice and mortgage against that, use the money. That should be duly noted. I don't know what kind of a stand-alone autonomous operation it could be, but I'd certainly like to see it put up on good business principles and see that you're not putting your sailors, soldiers, and airmen in conditions that do not befit those people.

They go where they're told to go - that's the difference. This is where Treasury Board doesn't seem to click in on it. The civil servants in Ottawa come here and mainly have their career here and can buy a home. It's a very transient lifestyle, and that has to be translated somehow, because that lifestyle and its transition is sometimes a cause of family break-ups, low morale, and always anticipating what life is going to be like at the new base.

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I think we in this committee should somehow be able to look very carefully at that and see if we can come up with some answers that will ease that problem.

I mentioned this talking with Mr. Frazer a moment ago. I guess the first breakthrough was when General de Chastelain appeared and we finally got a break. When we sell that property, why in the name of blazes does the money always go back to Treasury Board? That was your asset and you had to replace that asset with another, and then you have to go and bag it about ten times to get the money back. Why can't it be returned as income or some kind of an asset to the forces and be managed as part of the budget process? I just say that because I'm thinking out loud here. I don't expect you to have the answers.

BGen Popowych: Mr. Richardson, I must intervene here. Let me assure you that in my previous background, a previous incarnation, I was responsible for matters of housing.

You ought to know that in the 1980s we developed mature concepts, which would have led to an organization that would have managed our entire married quarters inventory on a pure business mode, along the lines you have described. It was so good in concept that the Australians came here, borrowed it, went over, and implemented it. Do you know what they're doing now? They're not fooling around with mere borrowing, modest borrowing; they're going into the international money markets to get their funding. We're still talking about it.

Mr. John Richardson: Would you do me a favour, then, Mr. Chairman? Could we have some document or some guidance like that tabled to this committee? If you can find it, we'd appreciate it.

BGen Popowych: On the housing?

Mr. John Richardson: Yes. Also, if through research we can find out from the Australians what they're doing, we could pull it together and have a look at that.

I have no other points. I just feel for people in the services that they have to go through these rigid, restrictive methods when we're coming up with new methods of financing. We must stay within the rules of good accounting practices and auditing procedures, but I think we can do that and take away that yoke around your neck when you want some flexibility; you need the money, you have the asset, and you can borrow against the asset.

BGen Popowych: Absolutely.

On the non-public side, Mr. Richardson, borrowing is indeed one of the financing alternatives we are seriously examining as part of the $75 million I made reference to in order to recapitalize our infrastructure. I'm reassured that we have your support, at least conceptually.

Thank you.

Mr. John Richardson: I have no more questions, Mr. Chairman.

The Vice-Chairman (Mr. Robert Bertrand): Mr. Frazer, did you have another question?

Mr. Jack Frazer: Yes, if I may, Mr. Chairman, a fairly brief one. I want to put Mr. Roberts and SISIP on the stump here for a minute.

I note with interest that SISIP has contributed $3 million to this program. I don't think Sun Life or Prudential are in the business of providing that sort of money. First of all, what is the financial status of SISIP? Rather than giving money to this program, why can't you reduce the rates you charge for your insurance coverage?

Mr. Roberts: There's a whole number of issues there, Mr. Frazer.

What is our financial status at this point in time? Assets are approximately $270 million and surplus is approximately $143 million. The $3 million the general is referring to is contribution decided upon by our board of directors.

As for the rates you're talking about with respect to life insurance, right now our term insurance rates are anywhere from 13% to 40% below what is available in the marketplace. In fact, all of our product lines on the life insurance side are priced to break even. So where we're making money is on the investment side.

Mr. Jack Frazer: Then why don't you lower the rates? If you can afford to give up $3 million to a program, which is unlike what any other insurance program would do, why not give the clients the benefit of your good management, your good investments, and say you're going to lower -

Mr. Roberts: We have in fact done that in three of the last nine years. In fact, one year the rates were lowered 25% for non-smokers, which as far as I know is unheard of within the industry. So the rates have in fact been lowered three times in the nine years that I've been running the program.

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Mr. Jack Frazer: Why not some more?

Mr. Roberts: How low do you go, sir?

Mr. Jack Frazer: That $3 million you gave away wasn't yours to give really; it belonged to your clients. Therefore, I wonder why we don't give them the benefit, as I say, of your good management and your good investments.

I guess it's like a program. I'm getting Reformish on you now. We think taxes should be lowered because that will generate more income and more jobs for people. I suggest to you that one way you can improve the lot of the service person is to make the necessary things that he or she has to provide for his or her family more reasonable.

Mr. Roberts: Mr. Frazer, a 28-year-old non-smoker right now can buy $100,000 worth of coverage for $6 a month, 60¢ per $10,000. Compare that to what he would pay in the industry and there is no comparison.

Mr. Jack Frazer: I don't want to compare it. I'm commending you on the way you managed the program, but if you're so darn good, why don't you give the guy a further break? Don't say that he buys it here less than there. Why not give him the full benefit?

BGen Popowych: Mr. Frazer, this particular issue you raise is indeed a matter that has been considered by the board of directors for our insurance plan. You ought to know that the SISIP dollar is an NPF dollar. It is true it is made up of clients who pay for a certain service and we make money. Insurance companies in the private sector build huge buildings. They pay dividends to their shareholders.

We decided as a board to deal with the profits by first of all giving direct benefits to the members of that plan in the form of reduced rates. At the same time, we are going to maximize that profit dollar to help improve the physical plant via an infusion of $3 million. It may be more in the future, and that has yet to be determined, but we have adopted an approach.

Yes, we could have made this whole insurance plan for free in some cases, in some aspects of the program literally. But the board has chosen to give a few goodies to the individual members and goodies for the entire military community in the form of improved infrastructure.

Mr. Herb Grubel: There is the problem of course of what happens if the investment portfolio does not perform as well.

Mr. Roberts: Of course there are some fluctuations in the marketplace as well. That having been said, it also provides us with the opportunity to introduce other plans, as we are this year. For example, the spousal disability plan - there are only two companies I know of in Canada that have one. We are introducing such a plan, which needs obviously to be underwritten in the first instance, or at least have a plan fluctuation reserve so that service is there. At any one point in time, in fact as of right now, we need $100 million.

Mr. Jack Frazer: To cover your liabilities.

Mr. Roberts: No, the liabilities are covered already by virtue of reserves, and so on. We need to have the resources there to cover the potential risks associated with, for example, bad claims experience. God forbid that a Canadian Forces service flight goes down, because I have 71% of the marketplace in terms of participation. So we need a considerable surplus at the same time.

Mr. Jack Frazer: But is the fund right now solidly financed and your liabilities covered?

Mr. Roberts: Absolutely. It's a very sound plan, and there are two sides to it.

Mr. Jack Frazer: That's unusual in the government.

BGen Popowych: That's precisely probably why it's successful, Mr. Frazer. This is a business. And if members can be a little bit patient, this story is worth sharing with you.

In 1969, Mr. Frazer, someone, God bless his soul, said that the soldiers who are being killed, either by accidents or in operations, left their loved ones financially destitute. There was no other way of solving the problem through the normal public venues available at that time. One individual determined we ought to have insurance to supplement the income.

The industry was approached. A handful of replies came back, roughly 60. They either said no or the premiums were so high that it was a no. Nobody was interested in providing insurance for a high-risk group that was the Canadian Forces. Therefore, what was to be done?

What was done is that a Canadian Forces central fund gave a loan of $5,000 to the individuals to set up an insurance company, a program. In the fullness of time, we partnered with a particular insurance company. By 1986 our book of business was worth $2 billion. That was still not good enough. Under Mr. Roberts' leadership, we developed a strategic plan that turned our approach from paternalistic to a more business and customer oriented one. Our book of business today is over $12 billion.

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Our people have the best programs for the least cost. In point of fact, another initiative we are testing at the moment, in addition to the spousal insurance program, is a program called ``Towards Financial Independence.'' This would be a system of financial counsellors whose purpose it is to ensure the personal wealth of our people.

A young soldier today with the rather modest salary that he's getting is of little interest to the financial planning community in the private sector, so there's very little available. So what we saw in 1969 for the insurance side of the house we now see in a different form on the financial planning side. We have developed a financial planning program called ``Towards Financial Independence''. We're test-marketing it.

Getting $10 a month from a young man for benefits that will accrue in 50 or 60 years is rather tough, but we're giving it a go. It's a high-risk venture, and it is the SISIP money that's underwriting that.

The Vice-Chairman (Mr. Robert Bertrand): Thank you. Just a couple of quick questions and then we'll end it. Coming back to CANEX, are the goods you buy in CANEX taxable?

Mr. M. Lemoine (President, Canadian Forces Exchange System, Department of National Defence): Yes, sir, they are. We pay GST the same as any other business. We pay the same taxes as any other business, other than corporate income tax. We do not pay corporate income tax.

The Vice-Chairman (Mr. Robert Bertrand): Another quick question on SISIP. Do you pay the same taxes as an insurance company?

Mr. Roberts: No. We're non-public funds, so we don't pay corporate income tax either. This is a group plan owned by the Canadian Forces.

The Vice-Chairman (Mr. Robert Bertrand): So you don't pay any corporate taxes at all.

Mr. Roberts: No, not corporate income tax.

The Vice-Chairman (Mr. Robert Bertrand): Do you have an annual report? I'd love to have a look at it, and maybe other members of the committee would like to have a look at it also.

Mr. Herb Grubel: Do you pay rent for the facilities you use?

Mr. Roberts: Yes, we do. I have my own leases and pay all the bills, sir.

Mr. Jack Frazer: One final question. General Popowych, you mention you're conducting a comprehensive review of your personnel support. Will there be a report on that, and would that be available to us?

BGen Popowych: If you wish, it will be available to this committee.

Mr. Jack Frazer: Do you have any idea when it might be available?

BGen Popowych: The actual assessments will be completed at the end of this month. We will require roughly a month to do the actual analysis, the validation of the requirements. All this is to say, Mr. Frazer, that it could be available in late April or perhaps early May.

Mr. Jack Frazer: I think it would be of tremendous help to us.

BGen Popowych: With pleasure.

The Vice-Chairman (Mr. Robert Bertrand): After the election.

General, I want to thank you very much, and your witnesses. It was a most interesting discussion we had. We'll take a couple of minutes just to give the witnesses time to change places.

BGen Popowych: Thank you.

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The Vice-Chairman (Mr. Robert Bertrand): Mr. Jamieson, welcome. You have an opening statement.

Mr. J.F.J. Jamieson (Director, Military Family Support, Department of National Defence): Yes, I do. I think my two colleagues must be in the lineup at the ladies washroom. Can we give them one more minute?

The Vice-Chairman (Mr. Robert Bertrand): Sure.

Mr. Jamieson: The ladies have a privilege.

The Vice-Chairman (Mr. Robert Bertrand): The call of nature is a strong one.

[Translation]

Mr. Jamieson: Perhaps we could begin.

[English]

I can introduce them when they get in.

[Translation]

Mr. Chairman, members of the committee, ladies and gentlemen, I have been asked to provide you with a brief introduction to the Military Family Support Program and to give you an overview of the primary issues and concerns reported by spouses of Canadian Forces members repeatedly in their contacts with those who deliver the Military Family Support Program services.

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[English]

After four years of formal study resulting in the study report on family support, the military family support program was introduced in 1991. The program recognizes that spouses of Canadian Forces members contribute to and support all Canadian Forces missions and that support for families during out of country deployments and extended temporary duty is of great concern to the Canadian Forces members.

The program also acknowledges sacrifices made by spouses, including employment instability, separation from the extended family and extra child care responsibilities. It attempts to assist with these various concerns.

The military family support program recognizes the major movement of women into the workforce, social changes requiring family-friendly initiatives by employers, and the desire of Canadian Forces spouses to have a full voice in developing and shaping the services that affect their daily lives and those of their children.

The military family support program is implemented through family resource centres at all Canadian bases, wings and stations, and at some foreign locations.

Through its various services and programs, the program provides needed information, support and referral. It promotes health and social well-being. It buffers lifestyle stresses. It enhances coping skills. It assists in the prevention of individual family and community breakdown and it aids individuals and families in distress.

This program is undertaken by professional coordinators and trained volunteers who develop and provide services in five core areas: information and referral; children's services; educational services, including deployment assistance; volunteer development; and crisis intervention.

[Translation]

Each military family resource centre is normally governed by a provincially incorporated and community elected board of directors of which at least 51% must be civilian spouses of Canadian Forces members. Each board is an employer and works in partnership with the local commander to serve the needs of all Canadian Forces families in the area. The local commander is represented on the board by a senior officer.

Outside Canada, military family resources centres operate under the direct authority of the local Canadian Forces commander as incorporation is not possible. The local commander receives council from an advisory board with a composition similar to the Canadian based boards.

The Military Family Support Program was allocated up to $17 million per year for a five-year period commencing April 1, 1991. The program has expended no more than $11 million to date and considerably less in the first two years. This amount does not include infrastructure, utilities and maintenance provided by local commanders and squadrons.

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[English]

Military family resource centres have been judged to be highly useful and they are valued by most users of programs and services as well as by most local commanders. They have become an integral part of the Canadian Forces lifestyle and appear to be one of our most positive personnel support initiatives in recent years. They are particularly valued by minority-language families and they have received specific praise for work in this area.

The incorporated board model has opened the door to various local and provincial grants and fund-raising opportunities, thus providing employment for over 200 contract employees, in addition to the 180 sponsored by Canadian Forces core funding. Many of these employees are of course spouses of Canadian Forces members, and in excess of 1,000 other spouses and Canadian Forces members serve as volunteers.

There is a perception in some quarters that military family resource centres are not needed in major Canadian cities.

The experience of the program to date contradicts this perception. Orientation to services at a new location, schooling, housing and employment concerns for the spouse, support during deployments, feelings of isolation away from a supportive base or extended family, cost-of-living concerns and the recent withdrawal of the services at some Canadian Forces housing areas within cities are often greater stressors for Canadian Forces families in our large cities than at our large rural bases. The provision of programs and services related to unique or accentuated needs of Canadian Forces families in cities is a valid mandate of the program.

[Translation]

The value of the Military Family Support Program has been reflected in a recent Chief of Review Services assessment of the program. At the same time, the Chief of Review Services report recommended several ways to improve the program. Included in this are identification and detailing of core services to be provided by all military family resource centres, as well as acceptable second level services where required to ensure more consistent quality services are delivered to all Canadian Forces families.

[English]

Employment and child care concerns are the two issues most frequently raised by our spouses in formal and informal contacts with staff at military family resource centres. While much has been done by the centres to assist spouses with employment concerns through job banks, curriculum vitae preparation, support networks and limited user-pay skill upgrading, no public funds are spent in this area for formal assistance to or training of spouses.

There are many factors involved in the employment concerns of Canadian Forces spouses. Essentially, these concerns revolve around the mobility required of Canadian Forces families, which results in some or all of the following: loss of a required second income; the requirement to move to a higher cost-of-living area, while losing one income, and possibly being unable to sell a home; the difficulty in finding work in today's economy; the need to requalify or recertify in the new province; and the loss of seniority in transferring.

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Underemployment may also be a factor, even when employment is found. One study reported that employed spouses of Canadian Forces members earned 40% on average of what employed spouses of public servants earned.

While there's no perfect solution to this complex situation it may be time to consider some form of direct assistance to Canadian Forces spouses at the time of posting. An entitlement to professional employment-finding assistance, to upgrading training, to language training, or to home-based business start-up assistance may assist in resolving this difficult situation, but the authority to use public funds in this area would be required.

Military family resource centres have also accomplished much in assisting many Canadian Forces families, including single parents, shift workers and dual career couples as well as those with a deployed Canadian Forces member to find affordable child care options. Many military family resource centres offer a range of child care aids, including co-op babysitting, parent and tot groups, structured play groups, nursery schools, family home day care and institutional day care.

The centres are limited in this area, however, by Treasury Board policy, which does not allow federal public moneys to be used to subsidize child care costs. This greatly limits our ability to support our families in many situations. This issue needs to be addressed if we're to make any major progress in this area.

While child care issues ranging from emergency short-term care to full-fledged institutional day care are not unique to the Canadian Forces community we do have some unique circumstances. Canadian Forces families, especially families with young children, often do not have extended family or even close friends near at hand. They may require two incomes to sustain a reasonable standard of living, particularly in view of minimal or no pay increases in recent years.

Additionally, the increased pace of out-of-country deployments has put extra stress on the parent left behind who may now need to juggle needed employment with extra parenting responsibilities. The requirement to be on call for base defence force exercises, courses, weekend duties and shift work also puts extra strain on child care arrangements, particularly for single parents and dual career couples.

As in the case of spousal employment, it may now be time to seek authority to use some public funds to support some child care options under some circumstances. The United States Department of Defense has long ago gained permission to use public funds to subsidize child care under some circumstances.

I would now like to introduce my two colleagues. To my immediate left is Deborah Watkins, who is a military spouse and has done some short-term contract work for my directorate. Leslie Climie is a member of the Directorate of Military Family Support and has a special interest in children's services. She is still a spouse of a very recently retired military member.

We would be very happy to attempt to answer any questions or concerns you may have.

The Vice-Chairman (Mr. Robert Bertrand): Thank you very much.

[Translation]

We will now proceed to questions. Mr. de Savoye, you have 10 minutes.

Mr. Pierre de Savoye: The Military Family Support Program is without a doubt an indispensable Initiative, and this applies as well to the larger centres. You may recall that earlier on, I mentioned that my riding was home to a large number of military personnel working on the Valcartier base.

You focused on problems and requirements. Among other things, it is true that our military personnel are not well paid. Their workload is quite variable and very demanding. Their families are left to deal with a number of problems. Among other things, you mentioned child care.

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As you know, the committee will be visiting a number of military bases in April. All committee members will be happy then to listen to what military personnel and their families have to say. In theory, their statements should complement what we have heard today.

I do have several questions for you. Are the support centres encouraging military personnel and their families to come before the committee to highlight the problems and needs to which you referred?

Could you also tell us to what extent military personnel are afraid to testify before the committee and if they are right to believe that their testimony will serve no valid purpose?

I'm asking you these questions because since it was announced that the committee will be travelling to these bases, I have been trying to invite military personnel in my riding and their families to share with me the problems that they are experiencing. They have told me quite frankly that they are concerned that their testimony could hurt their careers. I would like you to enlighten the committee this morning on these allegations and on what you intend to do to encourage military personnel to share their concerns with us and basically back your position. I await your response,Mr. Jamieson.

[English]

Mr. Jamieson: Certainly the family members who speak to me have never shown any reluctance or fear in my experience. I speak with family members daily, particularly those who are on the boards of directors, who make many demands on us and are very straightforward with it.

I understand that in your travel you will be going to the family support centre of every base. We have already spoken to some of the staff there and encouraged them to encourage family members to come and speak with you. My experience is that there is no reluctance or shyness to do that. There may be some who will come.

Now, we do have two spouses right here who can perhaps speak to that better than I.

Mr. Pierre de Savoye: I would like to hear from them.

Ms L. Climie (Directorate of Military Family Support, Department of National Defence): I think you've raised a very delicate point here. I'm not going to name the base, but I'm going to tell you about an occasion from last year.

Across the land forces there were focus groups operated in order to determine why the morale was so low. This was taken on during last winter. We were working closely with CF PARU, which is what it was called then. I think it's now called something else. It's a research component of DND at headquarters. They were likewise running focus groups for another reason, but in terms of seeing how we could improve personnel policies for military and family members, they were looking at family-friendly personnel policies in particular. They had asked our cooperation to work with our family resource centres.

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I was tasked to contact a number of centres and organize focus groups where our spouses would participate in either language with these trained focus group leaders. One place I approached was very concerned that we were going to have trouble bringing the spouses out; they had just gone through this with land forces and a very nasty thing happened.

The focus groups the land forces were conducting had ranks, officers, and spouses, and the family resource centres cooperated in terms of setting up the focus group for the spouses. After a day it came out that there was a rumour on this base that there was going to be a pay raise. In fact, that did happen.

I don't know particularly how it came out, but the powers that be on that base were absolutely furious. They said this rumour had started with the spouses' focus group. There was no consideration that it had been with the members or with the officers. Each member who had participated in a focus group was brought in personally by his direct superior and told to go home and tell his wife that she had erred, she should not have been involved in a focus group, she should have kept her yap shut, and that his career could certainly be in jeopardy because of her speaking out of turn.

When you bring forth the question of whether our spouses are going to be willing to participate in focus groups, what guarantee can we offer when the military establishment at certain places has this mindset? I bring that forth. We will do our best, I guarantee you. Our colleagues in the field understand the importance of our spouses having a voice with people such as your group, but there's no guarantee that people will feel free. How can we guarantee them safety when something like this has just happened within the past 12 months?

Mr. Pierre de Savoye: Thank you for your testimony. This is exactly what I'm experiencing in my riding. If this exercise is to be worthwhile for our committee, somehow, somewhere, someone should do something to ensure that the testimony we will receive will be done freely and without strings of any kind attached to the careers of our military people.

Mr. Jamieson: If I may add one thing, the whole reason we have set up the family support centre in the way I described as incorporated entities, the majority of which are the spouses themselves, was that this was a major step forward for us in turning over to spouses some authority, some control over events that affect their lives.

There is no doubt that, as Leslie has indicated, there are some perceptions of concern. But sir, you have only to read the paper to know that spouses are speaking to the press. The Citizen this week is full of it. We're in a transition phase where some people are still afraid that what they say may affect their spouse's career. Many are not, and I would hope and suspect you will meet people who will speak to you very frankly.

If you have any suggestions for us in terms of our family support centres to ensure that you meet with every type or range of people you wish, we'll do what we can to arrange that.

Mr. Pierre de Savoye: The centre of my question was that since this committee needs the military and their families to support and confirm your pinpointing of needs and problems, what are you doing through the centres to make sure this committee will receive as much testimony as it can? What are you proactively doing? I don't mean what you're expecting, but what you're proactively doing.

Mr. Jamieson: We are simply making the boards aware that the committee is coming around and that anyone who wishes to is free to come to the centre and speak to the committee the day you visit.

Mr. Pierre de Savoye: Could we have a copy of that correspondence to inspect?

Mr. Jamieson: There isn't any correspondence right now. I'm talking to the centres because I've just learned myself in the last week where you're going, and I don't even know all the places you're going. I know you're going to Halifax, Edmonton....

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Mr. Pierre de Savoye: Valcartier.

Mr. Jamieson: I will get from the SCONDVA support team the full list of bases. We will write a letter and I'd be happy to turn over a copy of it. We have nothing to hide.

Mr. Pierre de Savoye: No, I'm not suggesting that. I'm suggesting that considering the feedback I have in my riding I think it would be more than appropriate for you to proactively intervene. Certainly a copy of your correspondence to that effect would help ensure that the best outcome for this committee can be met.

Mr. Jamieson: That will be done within the week, sir.

[Translation]

Mr. Pierre de Savoye: Thank you, Mr. Chairman.

[English]

The Vice-Chairman (Mr. Robert Bertrand): Just for the information of the members present, we have a vote in 30 minutes. We can proceed for roughly another 15 minutes and then we'll have to go to the House and vote.

I would ask you, Mr. Grubel, to keep your next few questions as short as possible, because I think Mr. O'Reilly has a question also.

Mr. Herb Grubel: I want to congratulate you on setting up this family support service, but your major initiative at the end of your introduction was a plea for public funds for a child support program.

I can understand this, but I'm also representing people who are very much opposed to it. I want to give you the reason why they are opposed to it. The reason is that the money that goes to those individuals who have chosen to have their wives sent off to work, or whose wives have made that decision, must come from somewhere. It comes out of the general revenue.

The people who have made a different lifestyle choice and have decided to stay with their families have to pay the taxes in order to finance the lifestyle of those who choose to go out and work and leave the child care to the public purse.

The people who have made those lifestyle choices put a great deal of emphasis on the merit of mothers staying at home with their families, and they are very adamant with me that I oppose that kind of position. What do you think I should tell them?

Mr. Jamieson: Sir, I have two points and then I'll perhaps let others speak.

We're not seeking public funds per se. First of all, we're seeking permission to use departmental public funds, potentially.

Mr. Herb Grubel: It's the same thing.

Mr. Jamieson: I'm not specifically seeking an infusion of new funding, just permission under some circumstances.

Secondly, we're not asking for a general child care subsidy. In those areas where there are unique problems with child care contributed to or caused by the military, our department - for example, a single parent who is deployed to Bosnia for six months - we're asking that we be permitted to use public funds to meet those sorts of needs. Or a single parent who is on base defence force and gets a call at midnight that they must go out...we would like to have, through the family support centres, some known people in the community who would take that child on half an hour's notice at midnight. We could certify that this person is capable and we could make sure that these people exist so that this parent can do their duty.

We're not seeking, in my opinion, a blanket extraordinary child care program, but only where it relates to unique military requirements.

Mr. Herb Grubel: I'm very glad you clarified that.

BGen Popowych: If I may add, in your quest to seek assistance to reply philosophically to questions of those who oppose, in principle, child care, you might perhaps indicate that members of the Canadian Forces are unique in this society. They assume the ultimate liability in the protection of the state's interests. They forsake many personal rights that average normal Canadians have, and that is the most important distinguishing feature.

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Secondly, it's the most mobile part of the ``workforce'' of Canadian society. When they're moved under orders, they have no choice. The only choice they have is to quit.

Between those two elements I believe you may have a case to answer in a reasoned way. They are two valid concerns, by the way. I can understand the other point of view.

Mr. Herb Grubel: Just one quick comment. The obvious reply is these individuals make those choices when they join the armed forces. They know all about that, and they don't have to do it.

If you think they're not being paid enough, then by all means let's pay them more. But why make the distinction and make the pay through subsidies that are okay? That's the issue.

I thank you very much. I appreciate it. I think it was a very important clarification, though you qualified it at the end by saying that's your understanding of what the demand is. How sure are you of that?

I'm sorry. I'm going back to another channel. You said you want the money only for these specific purposes and I find that very legitimate. That's a very good call. I could defend that. But then you qualified that statement by saying it's your understanding this is what the demand is. It is not for general subsidy to child care.

Mr. Jamieson: I think there is in some quarters a general demand for more money in child care and some of our people are part of that.

Mr. Herb Grubel: Is that the official position?

Mr. Jamieson: No. We are asking that the legitimate part of this demand that is unique to us be addressed.

Mr. Herb Grubel: Thank you.

Mr. Jamieson: This is as other armed forces have done before us.

Mr. Herb Grubel: I'm sorry, I'm taking too much time.

The Vice-Chairman (Mr. Robert Bertrand): Mr. O'Reilly.

Mr. John O'Reilly: Thank you very much. I think, Mr. Chairman, we're perfectly paired. There are two opposition and two members. It's a vote on time allocation and I'm sure we could pair off and stay. I think this is a very important part of our study. I don't think we should rush through it for a vote when we have two opposition and two government members. I'm sure we can pair and stay.

The Vice-Chairman (Mr. Robert Bertrand): I'll just verify that with the whip's office.

Mr. John O'Reilly: Unless you gentlemen are against that, I wanted to carry on with that and thank you very much for attending.

I do feel many of the problems in the military are going to be addressed by people such as yourself, and they're very necessary. You can't go out and recruit a family or someone with a BA, MA, PhD, or whatever, bring them into the military and then not give them the support they could get outside in civilian life. So having a support system in place, having it funded and having child care as part of it would only make sense to me. Maybe that's a simplistic approach.

I want to ask, first of all, if you have a role as a military person. Are you a civilian?

Mr. Jamieson: I was in the military until recently, and I grew up in a military family.

Mr. John O'Reilly: Okay, but at the present.

Mr. Jamieson: No, I'm what's called a non-public-fund employee.

Mr. John O'Reilly: Okay. Are you offering help for discharged personnel such as yourself? When you come to the end of that 20-year term and you're not going to be kept on, at what point in time do you start counselling and training a person who is going to be discharged?

Mr. Jamieson: This doesn't come under family support. There is a program in place run by the personnel selection officers called ``Second Career Assistance Program'' to specifically assist them with transition. There is a move afoot to expand the mandate of family support centres to also have an associate membership with retired people because they still need that linkage in many areas.

Mr. John O'Reilly: I'm thinking more in line with people who have spent 17 or 18 years in the military and they face the biggest crisis in their lives when they're told they're not going to be kept on and they have to start planning. Crisis intervention at that point in time would be quite natural, and I don't know that this is forthcoming from the military establishment. If all of a sudden you've worked for 17 or 18 years and you're told you're redundant, I would think that is the biggest crisis in a person's life, and there is no support for that. That was the reason for the question, not to the continuing support.

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I also wanted to know in what year your particular program started.

Mr. Jamieson: It started in terms of public support in 1991. There were random family support centres at some locations, but getting it to be a coordinated, consistent, and effective program only started in 1991.

Mr. John O'Reilly: With respect to the Treasury Board policy on child care costs, is there someone in the military pleading that, or is that a lost cause?

BGen Popowych: That's a lost cause. We have to follow a government policy as reflected in keeping policy. We could not use the public dollar for those purposes, which is precluded by Treasury Board policy.

Ms Climie: I wonder if I could address this for a minute, because it's a favourite topic of mine. It goes back to when I was a social worker in the military as a civilian in 1988. It was put forth at that time that the federal public civil servants were entitled, if they were single parents, to a subsidy if they were away on temporary duty or training, whereas the military members, their colleagues, were not.

We've been fighting this through the social services branch, and also I believe the benefits branch has taken it over in the past three years, trying to get a parity for the military personnel with the federal public servants.

Apparently each time around it's blocked, for some reason or another. Now it's a union that's finding trouble with the fact that our military members might be away for six months on a UN peacekeeping mission, and of course no civilian would ever have to be away for six months. Therefore, it wouldn't be fair for the military to be subsidized for six months when a civilian would only be subsidized for three, or some such thing, for child care expenses.

The Vice-Chairman (Mr. Robert Bertrand): If I could interrupt, I talked to the whip's office and they want us present at the House for the vote.

Mr. Jamieson, General, I am terribly sorry about this. We have to go. It's such an important subject and we're just getting into it. I'm afraid we'll have to call you back, because I know there are still quite a few questions. John had a few and I had quite a few of them also.

We will reschedule. Thank you very much.

The meeting is adjourned.

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