Welcome, colleagues, to meeting number 13 of the Standing Committee on Government Operations and Estimates.
Today we will have a number of witnesses before us. In the first hour, from 4:30 to 5:30, we'll have with us representatives from Canada Post.
Before we get going, I should say for the benefit of the committee that we do have a fair amount of committee business to get through; however, most of it can wait until next Tuesday. I'm recommending that I deal with one item today. The rest I will defer until next Tuesday.
The reason I say this is that the witnesses in our second group, who are coming in at 4:30, will probably each have 10-minute opening statements. If we cut off 15 minutes of time for committee business, that would allow committee members only 15 minutes to ask questions. When they arrive, I'll discuss that with them, and hopefully they can make their opening statements a little more economical. However, we'll deal with that at the time.
Now I'd like to welcome the representatives from the Canada Post Corporation who are with us.
Welcome, Mr. Chopra, to you and your officials. Could you please identify yourself and the officials who are with you today? Then we'll begin right away with your opening statement.
Yes, thank you, Mr. Chair.
It is a privilege to be representing Canada Post, an institution that has occupied an important role for the people and businesses of our country for 253 years. A postal system that began with a few horses has evolved with the times. It continues to reinvent itself to meet the ever-changing needs and expectations of Canadians, yet it aspires to remain financially self-sustaining.
As the digital era signals another period of great change, we look forward to working with you to keep Canada Post strong, and to keep central its promise to serve all Canadians.
Our appearing before you today is very timely. Last week, announced an independent review of Canada Post. The review will hear from Canadians about their needs and expectations of the postal system, and we welcome that.
Also last week, Canada Post tabled its 2015 annual report, and that is where I would like to start today.
In 2015, Canada Post generated $6.3 billion in revenues and posted a $63-million before-tax profit. While positive, this is essentially a break-even result. The profit is modest in comparison to the revenues, and it is worth noting that it is down $131 million from the year before. The profit itself can be attributed to solid growth in parcels and a strong showing for our direct marketing service. It is also due in part to a one-time pricing adjustment that we implemented in 2014.
However, these factors alone are not enough to compensate for the mounting challenges we are facing today. The evidence for that statement is clear and laid bare in the data.
I don't want to recite a laundry list of stats and data, but I would like to offer some telling highlights. In the digital age, as Canadians choose to communicate and conduct their financial transactions online, our core business has been rapidly eroding. Since peaking in 2006, domestic letter mail volumes have fallen by 32% or 1.6 billion pieces. That has meant $1.1 billion in lost revenue.
While letter mail volumes are declining, the number of addresses we serve has been going up, by an average of 169,000 delivery points per year over the last nine years. This means we are serving more and more addresses, yet collecting less revenue per address to cover a growing cost.
Another layer is added to the challenge by something unique to Canada. We have a vast geography and one of the lowest population densities in the world. Together with a declining density of mail per address, this makes for a high-cost structure in our postal system.
There is also a major pension issue we must contend with. As of the end of last year, the Canada Post Corporation Registered Pension Plan had a solvency deficit to be funded, estimated at $6.2 billion.
It is the combination of these multiple, intertwined factors that defines and complicates our challenges, but I can say with optimism that for 253 years Canada Post has overcome difficult challenges, and this time will be no different.
We look forward to the conversation to determine the best path forward. We want to serve Canadians in the way they expect to be served, and at a reasonable cost.
While the data from our latest annual report clarifies our challenges, it also provides a picture of how much residents and businesses continue to use us. Yes, transaction mail volumes are declining, but it is still an important service across the country. People and businesses mailed almost 3.7 billion pieces last year. Small businesses especially continue to rely on us. Canada Post has always had a special relationship with small businesses, as we provide an affordable way for them to send and receive important items such as payments and invoices.
We also understand the importance of connecting rural, remote, and northern communities. Though this has always been the case, it has become even more relevant today, with the arrival of e-commerce. We are able to provide the people and businesses in these communities with access to goods that they did not have before, and we are the only parcel carrier that delivers to some remote communities. For them, we are not just a service; we are a lifeline.
In fact, consumers all over Canada depend on us to receive their packages as we deliver almost two out of every three online orders. In turn, Canadian retailers depend on us to deliver those online orders every day.
In this context, Canada Post has become a significant partner to the nation's emerging digital economy. Businesses are also using our direct marketing services. Why? Because to them, direct mail is not junk mail. It is an affordable and effective way to directly reach their customers. This is especially true for local neighbourhoods and local neighbourhood businesses that rely on these marketing methods. So, yes, we remain important to Canadians as they use our services in both traditional and new ways, and this is why it's imperative to find the solutions that will keep Canada Post strong and financially viable.
As you know, we have been doing our best to try to find solutions. We have been updating our equipment, exploring options, and fixing our pension plan, and we had implemented a plan to address our revenue shortfall. However, given the desire of the new government to independently review the future direction of Canada Post, we ended elements of that plan. Specifically, we terminated the conversion of nationwide community mailbox delivery, and we also suspended the annual price increase for 2016.
Now we look forward to establishing a new relationship. We want to work co-operatively and transparently with the task force and then, with this parliamentary committee, find the path forward. We have a lot of postal experience and expertise to offer, with which we can help create solutions to the serious and complex challenges ahead.
I spoke a bit about e-commerce, but before I conclude I would like to underscore how much online shopping has changed the way people use the postal service.
What is in our plants, our depots, our trucks today might surprise you. Because Canadians are sending fewer letters yet buying more goods online; they are changing us from a mail company that delivered some parcels to a company that is also delivering some mail.
A whole new generation of Canadians are building a personal relationship with Canada Post, even if they don't know it, and we have become the backbone of the Canadian retail industry. These retailers are also struggling to survive in the digital economy, but we are helping them succeed. We are providing shipping and logistics support; we are opening our data so they can offer upfront delivery information on their checkout to online shoppers.
Since the beginning, parcel delivery has been one of our core strengths. Now the legacy network of the past needs to reflect the new realities of e-commerce and a digital economy that will continue to generate a lot more parcels. But I must caution that overcoming our challenges won't be as simple as switching mail for parcels. Our challenges are more complex than that.
Though both parcels and direct marketing represent opportunity for Canada Post, their growth won't be enough to offset the decline of our core letter-mail business, and pay for the pension plan, to allow us to invest in our network or customer service. Therefore, this growth will not be enough to ensure our long-term financial self-sustainability.
I have talked a lot about the challenges we face, but we are hardly alone in this predicament. Digital communication is threatening other industries, too. Media, television, film, books, these industries are experiencing all kinds of existential challenges borne out of the digital era. Around the world, postal services are each exploring their own much-needed survival solutions that fit the unique needs of their country, their residents, and their businesses.
In other words, I think everyone agrees that there is a problem and what the nature of the problem is. It's finding the solutions that will be the tricky part, but it's a journey we look forward to. We are glad to be here today and to be working toward the same goal. We all want a strong postal service, one that is sustainable, and one that serves the needs and expectations of all Canadians no matter where they live.
Thank you, Mr. Chairman.
I want to begin by welcoming you and the members of your team to the committee, Mr. Chopra.
As I told you before we started the formal meeting, we will surely have an opportunity to work closely over the next few months, especially this fall. We will be happy to see you again to contribute to Canada Post's effort to adapt. Your presentation was very enlightening on that issue.
First, I want to offer you the committee's cooperation. Our objective is clear. We want to ensure that we are able to help you fulfill Canada Post's mandate, while taking into account your changing context.
Second, it should be pointed out that Canada Post is an independent corporation. However, when it runs into financial difficulties, taxpayers foot the bill. So we want to encourage you to continue along the path to profitability.
We have also seen the annual report that provides an overview of the situation. You did a good job of illustrating the challenge stemming from the fact that Canada Post is processing less and less mail and letters, but more and more parcels. Could you tell me how you see the coming years in terms of profitability in light of market changes, pressures you face and opportunities available to you?
As you said, you are barely managing to keep afloat. In 2015, Canada Post made a profit of $169 million. Business was also profitable in 2014, but there were operating losses over the previous three years. Basically, how do you see this year and the upcoming years in terms of profitability?
The single largest issue we're facing is the decline of letter mail. In its early days, between 1969 and 1975, letter mail grew by a billion mail pieces. Between 2006 and 2015, letter mail declined by 1.6 billion pieces. So our biggest challenge is to overcome the financial gaps that will be created by the very core business that has been the purpose of the corporation for at least the last 50 years.
We do not see the decline of letter mail; on the contrary, we see the decline of letter mail accelerating. When you open a bank account now, or open a cellphone account, your default option for getting your monthly bill is electronic. Increasingly the default option for virtually all communications is electronic. So we suspect that this acceleration will gradually increase. We're seeing this in media, we're seeing this in publishing, and we think this will continue to be a significant pressure on the corporation.
On your question about opportunities, we have looked at several areas of opportunity. The one we found where we had the core competencies was to deliver parcels, but parcels is still a quarter of our business. Even if we grow parcels extremely well...which is what we have done over the last two to three years in particular. In fact we are very proud of the work our employees are doing, day in and day out, winning in a highly competitive environment. Canada Post continues to deliver great service to retailers. But we think that opportunity will not be sufficient to overcome the size of the problem.
We also have a pension plan that has over $6 billion in solvency deficit.
Under the temporary relief, we are not contributing to the solvency deficit. If we were required to contribute, that would, again, be $6.2 billion over five years, and that type of financial strength is not there. The corporation's challenges will simply continue to mount in the absence of viable solutions that can be implemented and that play to the core strengths of our corporation.
Thank you very much, Mr. Chopra.
I would like to take this opportunity to thank you. As former Minister of Veterans Affairs, I really appreciated the leaflets you had produced to commemorate Remembrance Day that included a photograph of a little boy seeing his father go off to war and John McCrae's poem. I had those leaflets framed and put them on my desk.
On April 9, 2017, I'm sure you are planning a beautiful testimonial for the 100th anniversary of the Battle of Vimy Ridge, which coincides with Canada's 150th anniversary. They say that was basically the birth of our country.
Speaking of the centennial, during the first 100 years of Canada Post's existence, your corporation delivered parcels and was profitable. So there was a business model that has evolved based on the Canadian population. We have seen that you have had to make business decisions that were not always popular, but that stemmed from your market analysis.
In my riding of , many constituents have rural boxes or access to centralized mail. I do. I live in Lévis, in the Saint-Rédempteur neighbourhood, and my mailbox is fortunately not too far.
In terms of fairness, I would like to point out that three out of four Canadians have no home delivery service. With you running a deficit in terms of your operations, it is as if three Canadians with no home mail service were being asked to fund a door-to-door delivery for the others. The discussions that will take place during consultations will definitely be interesting.
You are giving us an overview of the situation. You are telling us that Canada Post is at a crossroads owing to a dramatic drop in terms of mail. You're saying that the increase in parcels does not cover the losses caused by the drop in home-delivered mail. Ultimately, as I was saying earlier, you have a sword of Damocles hanging over your head—a $6-billion solvency deficit that is not accounted for. In addition, your momentum is being impeded. The nature of my colleague's questions indicated that the decisions of the current government to suspend your action plan will result in an additional loss of revenue of nearly half a billion dollars.
How do you see the consultation process? What would be your recommendations on the work we, parliamentarians, will have to do to avoid throwing out the baby with the bathwater? We want to keep Canada Post, but we want Canada Post to meet the contemporary needs of a changing market by using, as you said, the Internet, and by using online accounts. We also want to get our parcels and we want to know what your operating principles are. Which of your recommendations on those issues could be taken into account by the committee?
I'm happy to be here with Raman Srivastava, who is our acting VP of audit and data. Raman has the knowledge to be able to answer a lot of the data questions that the committee may have.
Thank you for having us. The commission is really pleased to be here. We were here not too long ago to talk to this committee about the mandate of the commission, so I will not expand on that, but as you know, we're an organization that has been up and running for over 100 years. The purpose of the commission is definitely to ensure the integrity of the staffing system and the non-partisanship of the public service.
We deposited our annual report with Parliament on February 24. You will notice in our annual report that the staffing system is very healthy and doing well.
For 10 years, we have been operating under the new legislation, which is the Public Service Employment Act, which is what changed in 2005. After 10 years of practice under this act, and verification with our audit powers on entity audits of organizations, we are pleased to say that the system in staffing is doing very well and is pretty mature.
On that basis, we have started a modernization of our policies to ensure that we are more nimble in order to allow departments to reflect their operational realities.
On April 1, we launched “New Direction in Staffing”, which is a modernization of 12 pieces of legislation that we've put forward into one piece of legislation, but we've also strengthened the delegation to deputy heads, so that as delegated authorities under the act they have more flexibility to be able to attract and draw the talent they need in order to meet their operational needs. What we do is ensure that merit is met in these processes and that they're done on a non-partisan basis.
This modernization is critical for the commission in order to build the public service of tomorrow. We start building it today. That's the vision we've given ourselves at the commission, in order to be a strong employer and assist departments in ensuring that we have the right talent and the skill sets to meet the needs of government and service in the context of the future and where programs and priorities are taking government.
Deputy heads are now responsible for monitoring their staffing action, which is also allowing them to detect and correct the issues as they arise. We have simplified that delegation instrument, and they're held accountable in that instrument so that they can exercise discretion but also better serve Canadians.
We are committed to working with all stakeholders to support them in implementing these changes.
Since we are here to talk to you about our report on plans and priorities, the commission's priority is to work in close collaboration with deputy heads to promote and safeguard the non-partisan nature of the federal public service. For instance, we will continue to promote public servants' awareness, not only of their responsibilities, but also of their rights with respect to political activities.
A second very important priority for us is to ensure the integrity of the staffing system through clear policy direction and support, as well as ongoing oversight. We have created a team of staffing support advisors who will work closely with organizations to ensure that integrity.
We are also adapting our oversight capacity, with the objective of supporting continuous improvement and in-time corrections across the public service. Audit is but one tool that we use, and working more collaboratively and more directly with departments allows for this in-time correction.
Over the past 10 years we have audited over 90% of every organization in the system. As I said earlier, we saw that the system is in fact mature, so we are now shifting to an audit or a verification system, an oversight system, that will allow us to examine system-wide issues, and to be able to pay attention on the greater focus of system integrity—
I'd like first to introduce my colleagues, Jean-François Fleury, vice-president of learning programs; and Elizabeth Tromp, vice-president of corporate services and chief financial officer.
The school was created in 2004 as part of the Treasury Board portfolio, and it is the central learning and training institution for the public service.
The school has been in a major transformation since 2014 to respond to public service needs and deliver a better service at a lower cost. We are revitalizing our curriculum and modernizing how we deliver our learning services to provide public servants with equal access to the learning they need anywhere, any time,
in both official languages. We are moving from primarily classroom-based learning to a broadened learning ecosystem in various formats and through different means.
A new common curriculum supports public servants at every stage of their careers and includes foundational and transformational learning, talent management and leadership development programs, and specialized learning for functional communities. For Canadians, this new model fosters a culture of high performance, innovation, and continuous learning that results in a stronger, more effective, and more efficient public service, achieving better value for money.
To support the new approach, the school has been moving from a blended funding model based on parliamentary appropriations and cost recovery to one that is primarily funded through appropriations.
This new approach is funded from reallocations from client departments based on employee numbers, allowing the school to offer more enterprise-focused, value-added training to the roughly 240,000 public servants who make up the core public service.
This new funding model will come into effect for the first time in 2016-2017.
In the 2016-17 report on plans and priorities, the school reported forecasted spending of $93 million for 2015-16, decreasing to $92 million in 2016-17. Through the transition period of the transformation, spending increased to invest in updates to the school's learning platform. This transformation was entirely self-funded by the Canada School of Public Service drawing on its own reference levels.
Beginning in 2017-2018, the main estimates will reflect steady state funding of approximately $79 million, post-transformation.
In closing, I believe this is a great time for learning in the federal public service. We are already starting to see the positive results of our transition toward the new model. More and more public servants from all regions of the country are using the learning tools.
The school is proud to be leading the new public service-wide approach to learning, already contributing to a more engaged, up-to-date, agile, and responsive public service. This year we will be focusing on strengthening our partnerships both inside and outside the public service to deliver a robust learning platform.
We are committed to equipping public servants with the knowledge and skills needed to perform to the highest standards and to serve Canadians with excellence.
Thank you very much for invitation.
I'd like to introduce my colleagues France Duquette, deputy commissioner, and Éric Trottier, our chief financial officer.
Our office, Mr. Chair, was created in 2007 under the Public Servants Disclosure Protection Act, as part of the federal government's accountability initiative. Our office provides a safe and confidential mechanism for public servants and members of the public to disclose wrongdoing committed in the public sector. We also work to protect from reprisal people who have disclosed—whistleblowers, that is—or people who have co-operated in investigations.
What I would like to underscore is that we are the external whistleblowing agency and that my position is that of an agent of Parliament, which ensures independence and neutrality in our work at all times.
Under the legislation, public servants are given the option to report wrongdoing internally or externally; that is, to their manager or to someone called a senior officer, which is an internal position required to be created in every department and agency. As well, they can use the external option, which is to come directly to my office. The choice is theirs.
The Treasury Board is responsible for the administration of the internal regime.
The Office of the Public Sector Integrity Commissioner of Canada is often asked to speak of our ongoing investigations. Given the strict confidentiality provisions of the act, there to provide protections for all involved—the discloser, those participating as witnesses during an investigation, and the alleged wrongdoer or wrongdoers—we cannot confirm or deny the status of any file. We can and will only speak to those following the tabling in Parliament of a case report on a finding of wrongdoing.
Although we don't have jurisdiction over elected officials, we do examine any and all allegations and look at the actions and roles of public servants in the matter brought before us. Based on all the facts in a particular context, we then determine whether wrongdoing, as defined, was committed.
You invited me here today to speak about our priorities in delivering on the mandate I've just described. In order for us to do so, we generally maintain the same priorities from year to year.
They are to, first and foremost, ensure a sound management of our disclosure and reprisal regime that is timely, rigorous, independent and accessible.
Second, to foster a growing awareness and understanding of the whistleblowing regime.
And third, to ensure that the human resources capacity is in place to support those first two priorities.
In the past year, which was my first as the Public Sector Integrity Commissioner, we completed what we called a lean organization and all-organization initiative and we looked at every step in our operational process and the role of every person in those processes to ensure effectiveness, and by that I mean decisions that are timely, clear, consistent, accurate, complete, and fair.
In the coming year our goal is not only to continue to look at our own operational processes and implement process solutions but to guide our internal process internally and also to provide clarity and transparency to potential whistleblowers and reprisal complainants. We believe that people who come to our office should have as clear an understanding as possible of how their files will be handled and what to expect when they come to us for assistance and support. It will be an open process.
I am proud of our team, who have demonstrated resilience and professionalism, recognizing opportunities to improve and address file management issues as needed.
In terms of our second priority, our outreach efforts are increasingly targeting middle and non-management federal public servants. We see an opportunity to expand there.
While whistleblowing is gradually becoming more accepted, the fear of reprisal remains a major obstacle. We found this with the second focus group initiative that we recently completed, the results of which we are sharing with our key stakeholders, including the Treasury Board and the office of the chief human resources officer. We are commissioning a research paper in this regard to contribute to our own understanding and to the whistleblowing literature in Canada and the world.
With respect to our operations, we're projecting total expenditures of $5.4 million in 2016-17. In future years we plan to fill all our positions, which is up to 30 FTEs, and to continue to support initiatives that support our priorities. To give you an idea of where we are at this current moment in terms of operations, we started 2016-17 with 73 active files, and as of this morning, we have 28 active investigations.
I am confident that we will continue to be able to manage within our budget in the present circumstances.
Mr. Chair, I look forward to answering any questions members may have.
The issue of the decrease in below 35 is being addressed through a lot of the discussions on recruitment across government. Part of that was brought forward by the commission raising a bit of a red flag to the concerns we had. The commission was the holder of the statistics to indicate that we were concerned that that age group was dropping within public service.
Because we hold a lot of statistics, we're now happy to say that it is slowly increasing as hiring is picking up. Maybe not increasing at the pace we would hope it should, except that what's happening is there is further discussion and more awareness is being drawn. I think what we've done is basically continue to develop the creation of pools of students, of people who are ready for hire and who are below 35. We do have, and make accessible, pools of prequalified people to have access to public service.
We do external outreach. We also do internal outreach to make people cognizant of this. We're working very closely with our colleagues in the chief human resource office to basically start determining what kind of internship programs we could be putting forward to attract millennials, attract talent.
The attraction itself is not necessarily difficult. We can recruit. It's the retention aspect. Are we offering them the right jobs? Can we retain them? That is also being reviewed as to how to do the proper on-boarding to ensure retention, so these people can see that there are amazing careers you can have in public service.
In universities we've changed our approach. We do a lot more promotion of the types of careers you can have, such as science, veterinary science, policy, so there's a lot more of that outreach aspect. We are attracting that talent. We need to be better at it, though. Part of it is to make ourselves a more attractive employer.
Perhaps before I go to you, Ms. Vreeswijk, and because you mentioned it as well, Ms. Donoghue, in discussions around attracting millennials, obviously some of the recurring themes are the need to clamp down on outsourcing of federal government jobs, the need to deal with the two-tier workplaces that have developed in certain sectors in the public service and, obviously, an increased reliance on temp agencies in hiring public servants, hiring young people for jobs that rarely turn into permanent employment, leading to the revolving door of contract work.
While I appreciate work is being done in terms of outreach and recruitment, is your organization and, perhaps, the school as well, hearing those concerns? It's certainly what we're hearing in the media, and those of us who have peers who are struggling to find gainful employment with the federal government. I'm wondering if you see those areas as something that need to be tackled.
Again, the outsourcing, the two-tier jobs, and also the emergence of the industry of unpaid internships, which is very prevalent in the private sector but unfortunately creeps in everywhere, I'm wondering if you could speak to those areas.