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Results: 1 - 29 of 29
Jerome Berthelette
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Jerome Berthelette
2015-03-30 15:35
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Thank you, Mr. Chair.
I thank the committee for giving us this opportunity to discuss chapter 5 of our report, entitled “Support to the Automotive Sector”. It is in our 2014 Fall Report. Joining me at the table is Richard Domingue, Principal, who was responsible for the audit.
The global economic recession of 2008 negatively affected Canada's production and employment in the automotive industry. Vehicle sales declined sharply in the United States and Canada, and some companies, including Chrysler and General Motors, could not generate sufficient income to fund their operations.
In December 2008, the governments of Canada and Ontario joined the U.S. government and offered financial assistance to Chrysler Canada and GM Canada. In total, the federal government provided $9 billion of financial assistance to support the restructuring of Chrysler and GM, including their Canadian subsidiaries.
We looked at how Industry Canada, the Department of Finance Canada, and Export Development Canada managed this financial assistance. The assistance involved complex transactions, high uncertainty, and tight timeframes. These circumstances had an impact on what Industry Canada could do to manage the assistance.
We found that Industry Canada, the Department of Finance Canada, and Export Development Canada managed the financial support to the automotive sector in a way that contributed to the viability of the companies and the competitiveness of the sector in Canada over the short and medium terms.
Industry Canada adequately assessed the recovery prospects of Chrysler and GM. This helped the government decide whether to participate in the financing of the companies' restructuring. However, Industry Canada had limited information on required concessions from unionized labour and other stakeholders, and on GM Canada's pension liabilities. This lack of information made it difficult for the department to understand the impact of its assistance on the long-term viability of the companies.
Industry Canada's information on the use of funds was limited to broad categories. For example, Industry Canada had limited documentation on the actual use of a $2.8-billion loan made to GM Canada for capital expenditures, warranty claims, and other general corporate purposes. However, the department adequately monitored the companies' production commitments in Canada.
Mr. Chair, we also found that there was no comprehensive reporting to Parliament of information about the restructuring assistance. Based on the information publicly available, we found it impossible to gain a complete picture of the assistance provided and of the amounts recovered and lost.
In 2008, the federal government launched the automotive innovation fund program. The program's objective is to support automotive firms in their strategic, large-scale research and development projects to produce innovative, greener, and more fuel-efficient vehicles. In addition, the government expects the program to contribute to a more competitive Canadian automotive sector.
We looked at how Industry Canada managed this program. Overall we found that Industry Canada's assessment of each project proposal was consistent with the program's terms and conditions, but in our opinion its risk assessment framework was more comprehensive than required. The department could streamline its risk analysis, given that recipients assume all of the technical risks and most of the financial risks of their projects.
Industry Canada has adequate information coming from progress reports and site visits to allow the progress of each project to be tracked.
However, Industry Canada has not yet used this information to determine whether the program is achieving its objectives.
Industry Canada has agreed with our recommendations and set deadlines for their implementation. Last December the department met one of its deadlines by issuing a report entitled “Summary Report on Canada's Support for the Restructuring of General Motors and Chrysler in 2009”.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you.
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Philip Jennings
View Philip Jennings Profile
Philip Jennings
2015-03-30 15:42
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With that, thank you, Mr. Chair and committee members, for allowing me to provide you with a brief overview of Industry Canada's response to the Auditor General's 2014 fall report on the restructuring assistance provided to General Motors and Chrysler during the economic crisis of 2009 as well as the automotive innovation fund.
As you are aware, Canada has a strong automotive sector, which generates $17 billion annually of value-added, or 10% of Canada's manufacturing GDP. With some 730 automotive suppliers supporting our 11 assembly lines and three engine plants, the industry employs some 117,000 Canadians directly, and another 377,000 Canadians indirectly. In fact, in 2014, Ontario was the largest automotive manufacturing jurisdiction in North America—larger even than Michigan.
The auto sector is also export orientated. There are 90% of Canadian-made vehicles sold abroad, the vast majority of these in the United States. The proximity to the U.S., one of the most profitable auto markets, is one of our competitive strengths. Our auto sector is truly part of an integrated North American market.
Industry Canada is always interested in views and ideas that will help us support and grow Canada's automotive sector. While we hope we will never face a situation like the crisis of 2009 again, we are also interested in learning from such circumstances and in continuously improving how we prepare and respond. In this light, we welcomed the Auditor General's four recommendations. In fact, Industry Canada has already acted upon two of them and plans to act on the other two recommendations in a timely fashion. I will discuss this later in my remarks.
As you know, Mr. Chair, late 2008 and early 2009 was a period of extreme uncertainty and volatility. Credit was tightening, consumers were scaling down and postponing their spending, and economies around the globe appeared to be heading into recession, if they weren't already. The auto sector was experiencing first-hand the impacts of consumers postponing major expenditures. Annual vehicle sales plummeted in the U.S. in 2009, from about 17 million vehicles per year to a little over 10 million.
With shrinking sales, the financial situation of all companies was becoming desperate, but for GM and Chrysler it was particularly bad, as it did not have access to capital like the others. In November 2008, GM announced it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets. No credit institution was in a position to help either GM or Chrysler.
While Canadian sales did not dip as much, Canadian assemblers were not sheltered by the events in the U.S., given that close to 90% of Canadian-made cars are exported to that country. Canadian subsidiaries were directly impacted by their parent companies' difficulties. There was a real risk that GM and Chrysler might shutter their Canadian operations in an attempt to restructure.
GM and Chrysler were at the time, and continue to be, the two largest carmakers in Canada, accounting for more than 55% of total production. Many of Canada's suppliers depended on contracts with GM and Chrysler. Without this work, many would not have survived, leading to a hollowing out of the suppliers and creating problems for the other original automotive equipment manufacturers.
That would have triggered a collapse of the entire Canadian automotive supply chain. The strong links and interdependencies between our supply chain and our assemblers were the key motivation for government action and support of GM and Chrysler. GM and Chrysler in Canada had to be protected from being collateral damage of the events in the U.S., not only for their sake but for the entire suppliers sector and ultimately the entire automotive industry in Canada.
Mr. Chair, as the Auditor General concluded, the Government of Canada did what it set out to do: prevent the disorderly collapse of the auto sector and ensure a viable automotive sector in Canada.
The clock was ticking. There was a very short timeframe to find a viable remedy for both GM and Chrysler. Both were in dire financial straits, and Chrysler needed to find a buyer. From the point that the crisis started and GM submitted high-level restructuring plans to the U.S. Congress in late 2008, governments had less than a month to decide whether to provide an initial set of loans. Again, once the company submitted more detailed plans, there was only about six weeks to assess their long-term viability.
As these events demonstrate, the restructuring of GM and Chrysler took place under intensely challenging circumstances. It required unprecedented collective action by the federal, Ontario, and U.S. governments.
While Charles and I at Industry Canada were not there at the time of the restructuring, the federal government did quickly organize an automotive response team. It was headed by Mr. Richard Dicerni and Mr. Paul Boothe, the deputy minister and associate deputy minister at Industry Canada at the time, and Mr. Ron Parker and Mr. David Moloney, who are my predecessors and who led a team of dedicated public servants who worked tirelessly and in unique ways to manage the government's response to the crisis. It supported a steering committee made up of deputy ministers from Industry Canada and Finance, as well as representatives from Export Development Canada, the Privy Council Office, and the Ontario Ministry of Finance and Ministry of Economic Development and Tourism, who all played important roles.
The team also reached out to stakeholders and experts to ensure it quickly had access to the necessary knowledge and expertise, whether on financial corporate restructuring from KPMG and Ernst and Young or on U.S. and Canadian insolvency law from Cassels Brock or on the automotive market from CSM Worldwide and Casesa Shapiro Group.
There were external discussions with those in the industry, including assemblers and suppliers, to gather essential information needed to assess and understand the risk. The government then made a responsible decision and took decisive action. Afterwards, my department monitored the two companies to ensure they fulfilled their end of the bargain and to ensure that the restructuring would deliver the desired results.
Mr. Chair, I am impressed by the work accomplished by my predecessors for the Canadian industry and its workers. Their work was the basis of the government actions and it paid off. It also proved to be pivotal in securing the immediate future of Canada's automotive industry and the economy at large. In early 2009, GM and Chrysler assembly plants directly employed an estimated 14,000 workers. Today both companies continue to be Canada's largest automotive manufacturers, employing about 19,000 Canadians, and the economic benefits extend far beyond the two companies. At the time of the crisis, the Department of Finance estimated that a total of 52,000 jobs were directly or indirectly tied to production at GM and Chrysler. Another study, by Leslie Shiell and Robin Somerville at the IRPP, estimated that in 2010 a total of 100,000 jobs, including jobs in the supplier sector, could have been lost without the restructuring. The study further suggested that in 2009 alone the economy could have suffered losses of $23 billion had GM and Chrysler not successfully restructured. The government's decisive actions ensured that there was business for hundreds of suppliers. The effects even spilled over into industries across the Canadian economy.
Today, all Canadian automakers, including GM and Chrysler, are investing in their operations. In the last two years in particular, each of Canada's five automotive assemblers has reinvested in Canada, and auto parts manufacturers have also invested in their operations. Another sign that the sector is doing well is that Canada's production increased to almost 2.4 million vehicles in 2014. The auto sector will continue to contribute significantly to the Canadian economy for many years to come.
All this work was and continues to be recognized, not only by the industry but also by third party analysis such as the IRPP study I mentioned, which concluded that the restructuring assistance was successful. Furthermore, Industry Canada received recognition for its accomplishments, including in the form of the Institute of Public Administration of Canada's 2010 innovative management award. I believe it is a remarkable success story that we were able to partner quickly and effectively with our counterparts at home and abroad, within and outside of government, to provide sound advice and ultimately save thousands of jobs and hundreds of businesses, and to secure a future for Canada's auto sector.
With respect to the automotive innovation fund, I am pleased that the report reflects a program that continues to be well managed. In many respects, it's still early days for the program. It was established in 2008 and seven projects have been supported. The initial projects are just now being completed, yet we know from the initial evaluation we did in 2012 that the program is meeting its short-term objectives. It has leveraged about $2.8 billion in investments since its inception, and as the Auditor General has recommended, we will continue to report against its longer-term objectives as projects are completed.
Mr. Chair, I want to conclude my remarks by noting that we have learned a great deal from these experiences, and the Auditor General's recommendations have helped embed these. The recommendations have highlighted that clear and comprehensive reporting on support provided and the management of that support contributes to the public understanding of the restructuring success. In order to increase the ease of access to the information, last December we published a single summary report on the restructuring support and recoveries. We've also committed to undertaking a review of the management of the restructuring assistance with a focus on identifying lessons learned. This work will be completed this year.
The Auditor General also recommended reviewing how we evaluate proposals for support from the automotive innovation fund, and monitoring the performance of the program.
We have updated the program's risk assessment framework and made explicit the manner in which risk profiles of applicants are assessed. We will also evaluate the program again in 2017-18 to determine to what extent it achieves its long-term objectives.
It is fair to say, just like all Canadians, we hope we never face such a challenge again, requiring us to use the lessons learned from the 2009 crisis.
Thank you, Mr. Chair and committee members. We will be pleased to respond to your questions.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:10
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Good.
The report, if I understand the conclusions, said with respect to the management of this particular file, Industry Canada did a good job in assessing the recovery prospects of the company, found on page 7, paragraph 5.24; that Industry Canada monitored the restructuring assistance, page 11; it monitored the production commitments, page 12; and it has been recovering the funds, page 13.
The critiques, if I understand them, are in the nature of how exhaustive the due diligence was, not that there was due diligence absent. Is that a fair assessment, Mr. Berthelette?
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Jerome Berthelette
View Jerome Berthelette Profile
Jerome Berthelette
2015-03-30 16:11
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I believe that would be a fair assessment. Our critiques were about the amount of effort that went into the analysis.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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At the time, it said there was no report for the public with respect to the bailout. Is that complete now, Mr. Jennings?
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Philip Jennings
View Philip Jennings Profile
Philip Jennings
2015-03-30 16:11
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It is completed and is now posted on our website, as of December 2014.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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You pointed out there was no “lessons learned” exercise. That is in progress, as I understand it. What is the expected completion date?
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Philip Jennings
View Philip Jennings Profile
Philip Jennings
2015-03-30 16:11
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It will be completed by the end of this year.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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Okay.
On the auto innovation fund—which by the way in 2008 saved Ford's Essex Engine Plant in Windsor, that's a good news story there as well—I note that the Auditor General's report says that risk assessments were completed. I think for the first time I've seen one where they said it was perhaps too exhaustive in the due diligence. We'll take that as noted.
The project risk and proponent risk profiles, the Auditor General points out, were not part of the risk assessment framework. Are they now, Mr. Jennings?
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Philip Jennings
View Philip Jennings Profile
Philip Jennings
2015-03-30 16:12
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I'll clarify that the department has always used, and continues to use, a risk-based approach when it assesses projects. As noted in the Auditor General's report, we did not have that approach properly documented. As of October of last year, we've now included that explicitly in our documentation.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2015-03-30 17:26
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So in essence the government maybe needed to lend the company less money, based on.... Of course, there was $1 billion that GM eventually did need because they self-financed the pension plan. Perhaps they needed to give them less money because there were greater concessions given by the labour force to the company than we perhaps knew about because there was a bit of deficiency in the analysis—albeit it's difficult to do, Mr. Jennings; I understand the timeline you were up against.
Listen, some of us have a real vested interest in making sure that General Motors actually succeeds. I'm one of those people in this country. I happen to be a retiree from General Motors, so I have a vested interest. It goes beyond my general community. I have other colleagues around here as well who have folks in those communities and represent those folks—as Mr. Carrie said, “real” folks in those communities, and I agree with him.
On page 15, Mr. Berthelette, you talk about the lack of comprehensive reporting to Parliament.
I do accede, Mr. Jennings, that your department finally finished the report by the end of last year.
Mr. Berthelette, from what I'm reading at paragraphs 5.62, 5.63, and 5.64, are we talking about the sense that Parliament actually didn't receive any timely reporting in any succinct way, other than unless you chased three or four departments to figure things out, as to what actually happened with a report back on where the moneys were spent? Is that what I'm reading there?
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Ronnie Campbell
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Ronnie Campbell
2013-02-28 15:32
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Thank you, Mr. Chairman. I'm joined today by Glenn Wheeler and Nadine Cormier, who worked on this audit. With that I'll begin my opening statement.
Mr. Chair, thank you for this opportunity to discuss chapter 6, Transfer Payments to the Aerospace Sector—Industry Canada. Joining me at the table are Glenn Wheeler, Principal, and Nadine Cormier, Director, who were responsible for the audit.
The Government of Canada sees the aerospace sector as crucial to Canada's economic development, sovereignty, national security, and public safety. Since 2007, Industry Canada has managed two programs that provide repayable assistance to support industrial research and development in Canada's aerospace sector.
The strategic aerospace and defence initiative, SADI, is the federal government's second largest program of direct spending on research and development. Under this program the department has authorized assistance of just under $825 million since 2007. The program was created to support private sector industrial research and pre-competitive development in Canada's aerospace, defence, security, and space industries through repayable project contributions. At the time of our audit, the department managed repayable contribution agreements for 25 individual projects with recipients.
The Bombardier CSeries program is intended to encourage research and development that will result in the development of new commercial aircraft technologies. The department authorized assistance of $350 million to the Bombardier CSeries program in 2008. Industry Canada manages two repayable contribution agreements under this program.
Mr. Chairman, we examined whether Industry Canada had sufficient information to determine if the transfer payments were meeting the programs' objectives. We also looked at whether the department managed these programs according to the key requirements of the Treasury Board's policy on transfer payments as well as the terms and conditions of the programs. In addition, we examined whether Industry Canada collected repayments from recipients for contributions that are repayable under two previous transfer payment programs.
The work on this audit was completed in July 2012 and we have not audited actions taken by the department since then.
When funding for the Strategic Aerospace and Defence Initiative was approved in 2007, Industry Canada agreed to report publicly each year on contribution recipients as well as on program results and accomplishments. This reporting is in response to its commitment to set new standards for transparency following the end of its predecessor program in 2006—Technology Partnerships Canada.
We found that Industry Canada has yet to report publicly on the results of the Strategic Aerospace and Defence Initiative, as required by the funding approval it received in 2007. This means that both Parliament and Canadians do not know whether a program is meeting its objectives.
Before 2010, Industry Canada had inadequate performance information to determine progress being made to achieve the program's objectives. This information was needed to meet its requirement to report publicly each year on overall program results and accomplishments. Since 2010, the department has made improvements and now collects and consolidates sufficient information to allow it to determine progress against the program's objectives.
However, Industry Canada has delayed and cancelled some of its evaluation commitments, potentially missing out on early improvement opportunities. The department will need to follow through on commitments to collect additional performance information so that it can complete its planned evaluation of the program in 2016-17.
Similarly, the department needs to complete the final evaluation of technology partnerships Canada's longer term technological, economic, and societal outcomes. It may then be in a position to integrate lessons learned from this evaluation to potentially improve performance measurement for the strategic aerospace and defence initiative.
For the Bombardier CSeries program, Industry Canada has not collected all documents required by the two contribution agreements to determine progress toward the program's objectives. Therefore, it has a more limited picture of the program's performance. Again, this means that both Parliament and Canadians do not know whether the program is meeting its objectives.
Industry Canada has managed most aspects of these transfer payment programs appropriately, by using a reasonable control framework. For example, it reviews recipients' claims and progress reports before issuing payments. Also, the department funded only recipients that met program eligibility requirements. It also undertook a detailed review of proposed projects before signing contribution agreements with recipients.
In cases where contributions under two previous transfer payment programs—the defence industry productivity program and technology partnerships Canada—were repayable, the majority of repayments we examined were obtained by Industry Canada on time.
Industry Canada agreed with our recommendations and made commitments in its responses, several of which were to be implemented by the end of 2012. Mr. Chairman, the committee may wish to explore the progress made by the department to date in addressing our recommendations.
Mr. Chairman, this concludes my opening remarks. We would be pleased to answer the committee's questions.
Thank you.
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View Gerry Byrne Profile
Lib. (NL)
Thank you.
I note in your opening statement, Mr. Campbell, when you were referring to the Bombardier CSeries program, that you said to this committee that both Parliament and Canadians do not know whether the program is meeting its objectives. You said that in the course of your audit you found that Industry Canada had not collected all documents required by the two contribution agreements to determine progress towards the program's objectives.
From the point of view of this committee, we're trying to establish whether or not benchmarks are being met. It doesn't appear that they are. This is a significant amount of taxpayers' money being provided to individual companies in this regard. I'll leave it at that, but I'm still left a little confused.
I'll ask this question. Industry Canada committed to providing Parliament and Canadians with annual reports regarding the SADI program. It was approved, and SADI was initiated in 2007, yet there has never been a report to Parliament, if I understand correctly. Is that your understanding as well? I'll ask the associate deputy minister.
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Marta Morgan
View Marta Morgan Profile
Marta Morgan
2013-02-28 16:20
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We have reported a significant amount of information on the SADI program on our website, on new agreements, amounts disbursed, program service standards, repayments, and evaluation findings. The Auditor General recommended that we also report publicly in the form of an annual report on the extent to which the program is meeting its objectives and on the accomplishments of each project, so less on the project objective side of the program and more on the program objective side.
Now that projects are beginning to complete their R and D and enter the repayment phase and the implementation phase, we have more information to report on this. We've accepted that recommendation by the Auditor General and we've recently published a program highlights 2011-12 report, which we posted on our website in February.
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Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:22
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The ongoing is not to indicate that something hasn't already been done. We've achieved the first milestone, which was to have published a comprehensive report reflecting the 2011-12 fiscal year, which we did on February 8. It's available publicly on our website. The ongoing part is that every fiscal year thereafter we will do the same.
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View Bryan Hayes Profile
CPC (ON)
View Bryan Hayes Profile
2013-02-28 16:33
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Thank you, Mr. Chair.
It strikes me that it doesn't really matter if benchmarks are being met if the company you're dealing with goes out of business. I'm looking at the sizes of these distributions: $9.6 million, $52 million, and $19.6 million. We're talking huge money here. As a taxpayer, I would want some level of comfort that the company I'm dealing with is going to be around for the foreseeable future.
I took the opportunity to look at your website. It's a very good and comprehensive website. There's a section on due diligence review. Could you speak a bit on that? As a CGA, I'm more interested in the financial information you look at as part of your assessment of doing business with a company. I'm interested in the capabilities of your staff and the number of staff involved in the due diligence process.
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Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:34
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Thank you for the question, Mr. Chair.
The due diligence that's undertaken speaks to the reason it takes us a number of months to complete the review of an application. We will undertake a significant amount of work in a number of areas.
First, we look at the technology that the company is undertaking to work on, and often we will consult experts. The National Research Council is used for its expertise in aerospace in particular. We'll go to other departments if they have a scientific competence in an area and bring in information in that regard.
Second, we'll undertake to look at the market assessments the company has prepared and to validate those. We will work in the department to confirm information against other industry analyst reports, against reports prepared for public markets and such.
Then of course the financial due diligence is extensive. We will undertake a complete review of the company's financial health, because essentially that's the entity that takes on the obligation to return the funds to the crown under the agreement.
Speaking specifically—though I won't name the gentleman—the person who heads up the team we have which undertakes the financial analysis is the person who actually goes and scores the CFA exam in the United States for the best financial analysts who are put into industry. He's the one who marks their papers. So I actually have quite a bit of confidence that we have a team with a number of designations in different areas as well as strong financial analysis and financial review.
On the repayments side, we also undertake modelling. Not only do we take company information that they supply in terms of their outlook and repayments to us, but we'll also subject that to a number of tests. We do Monte Carlo simulations which is a probabilistic model to determine whether, based on past information, we'll expect to have the result we expect. We use that to evaluate whether or not we're going to meet our portfolio objectives.
Much of this says there's a lot done. There are a lot of belts and suspenders. There's a lot of review done, but it's still done with risk. You can work as hard as you can, but you can't take the risk away when you're in a business space that's R and D. So we still have to live with particular risk. We'll adjust the repayment expectation from each company based on the risk assessed. For example, if it's a higher risk company, we'll expect a higher repayment, which is a way of compensating for that in the program. For a lower risk company, there is a lower repayment cap on their contribution agreement. That's essentially how it comes together.
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View Gerry Byrne Profile
Lib. (NL)
I appreciate that.
It sounds to me, and I think it sounds to most Canadians, given our support to the aerospace sector since around 1959.... You seem to be indicating to this parliamentary committee that you expect it to be around for quite some time; because other governments are doing it, our competitiveness is at stake.
It sounds like this is a structural subsidy to the sector, and could potentially be a cause or a reason as to why the industry is not being held in compliance with reporting under its contribution agreements.
It does kind of baffle the mind as to why, if someone's receiving hundreds of millions of dollars in assistance from the Canadian taxpayer, they're not being held to account to at least report, as per the contribution agreements, for those hundreds of millions of dollars.
Could you report to the committee your activities to actually get compliance from those who are receiving those types of taxpayer dollars?
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Marta Morgan
View Marta Morgan Profile
Marta Morgan
2013-02-28 16:42
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What's important to note here is that from the outset of this program, the department has asked for information on the three program objectives through quarterly progress reports and annual site visits.
In the early stages, when the companies were just beginning their R and D activities, they provided significant information to us on their statements of work. What technical objectives were they trying to meet? What kind of materials were they using? What kinds of engineers were they using? Were they meeting their deadlines? Was the project on track?
We collected significant information vis-à-vis the project and whether the project was on track. I think that was acknowledged in the Auditor General's report. We also collected information through site visits and quarterly reports on program objectives, although that takes more time to materialize, because it really starts to relate to such issues as commercialization, which starts to happen a little bit later.
We improved the way we collected that information in 2010, which was also recognized by the Auditor General. That's something that we intend to continue.
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View Gerry Byrne Profile
Lib. (NL)
We've had an opportunity to go through the Auditor General's reports, so why don't we go right to you, Mr. Campbell, as assistant auditor general, and ask you, are you satisfied that the taxpayer dollar has been protected, or have the contribution agreements with industry, signed by Industry Canada, been satisfactorily achieved or enacted?
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Ronnie Campbell
View Ronnie Campbell Profile
Ronnie Campbell
2013-02-28 16:43
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Thank you, Mr. Chairman.
Following from the discussion that has just happened, I mean, certainly there were areas that were not satisfied. There were reports that were required that have not been received, and the department, rather than follow up with the companies, told us that they found other sources of the information. Yes, they've done the site visits, and we noted that by and large I think they had done them all, but we noted that those weren't well documented at all, and that sort of thing.
There are a lot of areas there. I'm referring particularly to paragraph 6.31 and the Bombardier CSeries and other comments where we think that could be improved.
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View John Williamson Profile
CPC (NB)
Okay. That's good. I'm going to come back to you. I want to speak to the assistant auditor general.
I'm concerned with your review of the old programs, TPC and DIPP, particularly the line in section 6.80, “We found that, of the repayments we reviewed as part of our audit, the Department obtained most repayments on time.”
I'd like a very quick answer. This wasn't a value for money audit. It was looking at procedures, I suppose, and how the program worked. Is that right?
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View John Williamson Profile
CPC (NB)
Thank you.
My time is running out. I want to return to Mr. Davies.
Mr. Davies, you talked about repayments that could in theory total 155% if you look at the interest, but the reality is that past programs never came anywhere near that. Otherwise, repayments would have been much higher and much, much closer to the amounts that were disbursed.
My problem is that we're falling into the trap that existed for the last two programs. You're not being transparent with taxpayers. I want to know how the department is going to respond to this report and the concerns that the assistant auditor general has that you're not meeting those requirements and that we don't end up with another program like TPC and DIPP, which were sold to taxpayers as value for money. At the end of the day, we saw that the forecasts weren't there, and the moneys were never recouped by the government and therefore the taxpayers.
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Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:48
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Mr. Chair, I think that when the government in 2007 introduced SADI the expectations established were that we would raise the bar in respect particularly of transparency around the program. I think that's the thread of some of the recommendations that we've agreed to in this AG report. It's to improve our efforts in that and we're going to undertake that.
In terms of repayment and specifically to your point, our repayment track record on SADI is going to be on the website. It's there now. Obviously, many of the entries are blank because the companies are not in a position where they owe us money. But at that point in time in the next fiscal year when first payments come due on our first round of contracts, any Canadian who wishes to know will be able to check that website and determine whether we're actually collecting those moneys. Over time, you'll have a cumulative story as to whether the goal to have a nominal repayment of the funds that have been issued under the program is being achieved.
Quite frankly, that's what we're interested in—the program, the administration of it, and the way we manage the portfolio—and certainly we'll provide that information for Canadians and parliamentarians to judge the progress against it.
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View Daryl Kramp Profile
CPC (ON)
Okay.
One of the challenges that I see moving forward...you need information in order to be able to make intelligent decisions and to verify, but the industry you're dealing with is highly competitive. It's strategic, and certainly confidentiality is tremendously important. You might want some information, but if that information becomes public, it can certainly put competitors in an advantageous position and/or adversely affect our own domestic suppliers.
How do you balance both the confidentiality and the transparency?
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Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:58
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I don't want to look like I'm excusing our February 8 performance on something we committed to do by December 31, but I would use this question to provide you with some information.
As we provided a considerable amount of information on each of the companies that we've supported in the program in that most recent report, we had to vet each of those releases. We're talking about a paragraph that long, but we had to work those through with each of those companies to ensure that the information we were releasing was not sensitive to their commercial interests. That does take time. We'll have to build further lead time into doing that report in the future so that we can make sure we have that in. That's part of the reason it kind of pushed us beyond the timeframe that we have to participate—
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Patricia Brady
View Patricia Brady Profile
Patricia Brady
2012-05-17 20:38
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The competition policy review panel was struck in 2008. It was an expert panel, led by Red Wilson. The report they came out with also came out in 2008; it's often called the Wilson report. As part of their review of Canada's competitiveness, they reviewed the Competition Act and the Investment Canada Act and made recommendations on how the Investment Canada Act could be improved, mostly how it could be liberalized.
But they made a number of recommendations around how it could be made more transparent. Some of those recommendations were adopted in 2009 through amendments to the act that allowed for more communication of information about the review process. The amendments that are in this budget bill would build on the 2009 amendments to increase transparency.
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Richard Dicerni
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Richard Dicerni
2011-09-28 15:33
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Thank you very much, Mr. Chairman, for inviting us to your first meeting.
I've been asked to do a bit of an overview of the department. I will start by noting my two colleagues: Simon has been with us for over a year now, and Kelly has been with us for two or three years.
I'd like to give a brief overview of what the department does and speak briefly about the industry portfolio, which encompasses the granting councils and so forth.
Now, first things first. We note on the first slide that we work with and support four ministers:
Mr. Paradis, who is the current minister; Mr. Goodyear, who is the Minister of State (Science and Technology) (Federal Economic Development Agency for Southern Ontario); Mr. Bernier, who is the Minister of State (Small Business and Tourism); and Mr. Clement, who has maintained his responsibilities for FedNor.
If you come and visit the department, you will see that, as public servants, we support the work of four ministers.
If you turn the page to Industry Canada's mandate, I'd like to focus on each of our mandates and then discuss with you some of the initiatives we are involved with in each.
The department in the portfolio seeks to achieve three overarching and interrelated objectives. First is to develop and administer sound marketplace policies and programs. Second is to foster and encourage a knowledge economy. Third is to support small, medium, and large business. Let me speak to each one of those.
In terms of the marketplace, it is important that all modern economies have sound, effective marketplace policies. People need to know what the rules are; people also need to know what the framework policies are. The department contributes in a number of ways to this. I'll give you a few examples. Within Industry Canada lies the Competition Bureau, which is very active in making the marketplace work. It is currently involved, for example, in reviewing the Maple Group's desire to acquire TMX. Recently it got involved in and sought to take remedial action against the Canadian Real Estate Association for anti-competitive rules that it thought the association was imposing on real estate agents. So the Competition Bureau is one framework policy program.
We also work with the Department of Canadian Heritage on a very important piece of legislation dealing with copyright. That's important framework legislation.
We also administer—and my colleague Simon is the lead on this—the Investment Canada Act to ensure that transactions which are subject to the act are of net benefit to the country.
Other offices within Industry Canada include the Canadian Intellectual Property Office, where we issue patents and trademarks; Measurement Canada; and Corporations Canada. So there is a whole series of small agencies whose purpose it is to make sure that marketplace programs and policies work to the benefit of Canadians, both consumers and businesses.
Second is the knowledge economy. In 2007 the government released its science and technology strategy on maximizing its investment in S and T for the benefit of all Canadians. The department is very directly involved in this, but also with partner organizations in the portfolio, which I'll speak about in a few minutes.
I'll give you a few examples of the initiatives that the department has taken to encourage and support the knowledge-based economy.
We managed the Knowledge Infrastructure Program. As part of the Economic Action Plan, within the department we spent $2 billion, which resulted in further spending of $3 billion for post-secondary institutions and the private sector. In total, $5 billion was invested to increase the quality of the infrastructure in colleges, CEGEPs and universities across the country. Some 500 projects have been supported through this program.
We also launched the Canada Excellence Research Chairs Program. With a third party, we designated 19 recipients around the world and invited them to come to Canada. They were granted chairs worth $10 million over seven years. I think that we found a fairly extraordinary class of individuals.
We have other programs, including the Centres of Excellence for Commercialization and Research. All of this is intended to support the knowledge-based economy.
Third is support for business. As I said, the department is involved in supporting small, medium, and large businesses. We work on a wide range of projects and initiatives. Obviously, the department was quite involved during the auto restructuring in working closely with the U.S. government, as well as with GM and Chrysler, to assist in their restructuring, which I think has turned out to be a good initiative.
We also work closely with the aerospace sector. We have a program that supports partnerships, which contributes to Canada punching above its weight in regard to civil aviation market share in international matters. This program has supported a number of initiatives across the country--Magellan in Winnipeg and Pratt & Whitney in Montreal--and I think it's an essential part of our tool kit to support the aerospace industry in order to always achieve higher degrees of productivity and innovation.
We also have programs in the department that support small-business financing, whereby we will insure some loans that are provided by financial institutions.
So that's it in a nutshell, and I say “in a nutshell” because I've appeared before some of you in the past to discuss certain specific programs, and this is a very brief overview of what the department does.
Let me briefly talk about some of the policy and legislative initiatives that we are working on presently.
On the digital economy strategy, including spectrum auctions, the department released last year a discussion paper about auctions pertaining to both the 700 megahertz and the 2,500 megahertz. The minister recently had further consultations. The assumption is that over the course of the next two or three months some fundamental orientation will be identified, so either later this year or early next year, some decisions around the spectrum should be made public.
Building the critical infrastructure is one of the major pillars of the digital economy strategy. Other pillars include enhancing skill sets and ensuring that there is a very solid statutory framework. I can refer in that respect to the spam bill that was passed. I can refer to the copyright bill, which will be, I believe, shortly reintroduced, and to our PIPEDA legislation. Those are important statutory pillars.
There's also another pillar that is related to improving ICT adoption. One of the key aspects that explains the difference in productivity between Canada and the United States is the lack of ICT adoption by small and medium-sized businesses. We are working with the Business Development Bank to enhance awareness among SMEs regarding the usefulness, from productivity and competitiveness perspectives, of higher ICT adoption.
Speaking of the BDC, we are also working on the BDC's legislative review. Every five to ten years, the BDC act must be reviewed, so we're in the process of looking at how well it has done over the last five to ten years and identifying possible enhancements to its legislative mandate to support more effectively Canadian SMEs and Canadian entrepreneurs.
The department is also working under Mr. Bernier's stewardship on a federal tourism strategy to bring together in a more focused manner the various elements that are in play at the federal level to support tourism.
Lastly, in terms of policy initiatives, I would note that the government asked Mr. Tom Jenkins, chairman of OpenText, to launch a panel on research and development last October. We expect him to be submitting his report in October of this year. This panel will focus on the expenditures of the federal government in support of R and D in order to make sure we have the right mix between tax expenditures and program expenditures.
Overall the government spends about $7 billion in this area; $3 billion or $4 billion of that is for tax expenditures, and the rest for a series of programs.
In terms of legislative initiatives, I mentioned copyright and PIPEDA. They are two of our major initiatives in regard to our digital economy strategy. I believe these pieces of legislation will be reintroduced shortly.
Let me say a word on the Industry Canada portfolio. I would draw your attention to pages four and five. If you look at those two together, it will be more productive.
I would now like to speak about Industry Canada's portfolio.
First, with regard to the obligation to be accountable, all these agencies and corporations are headed by executives or presidents whose position is at a level equal to that of the deputy ministers, meaning that they do not work for me; they are part of the Industry Canada portfolio. As deputy ministers, Simon and I have some duty to supervise what they do and how they do it. If things are not going well, that clarifies our interventions a little. Still, these organizations are independent entities. I am sure that these people would be pleased to meet with you and tell you about their activities.
Please allow me to give you an overview of these institutions.
The National Research Council, which has been around for 90 or 100 years, is focusing on two interventions: the IRAP, a very useful program for supporting SMEs and launching new businesses, and institutes across the country that aim to increase the commercialization and the participation of the private sector in certain targeted sectors.
We have two granting councils: the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council. They support fundamental research in universities. In the case of the Natural Sciences and Engineering Research Council, we are talking about approximately $1.1 billion, and with the Social Sciences and Humanities Research Council, it's approximately $700 million. A large part of this is recouped by the Indirect Costs Program. The grants they are awarded equal about $300 million. As part of the Science and Technology Strategy, these are obviously important partners, given that they work with the universities and, increasingly, with colleges.
There is also the Canadian Space Agency, in Saint-Hubert, which aims to support space exploration and the space industry.
I spoke earlier about the Business Development Bank of Canada, in Montreal, which supports some 29,000 or 30,000 clients annually through loans. It played a significant role during the economic crisis by increasing the credit available to entrepreneurs to ensure that the money was circulating in the economy.
The portfolio also includes Statistics Canada, which has just completed the census and the National Household Survey. As you know, the census went well, and the participation rate was high at 98.1%, which is very good. I think that Statistics Canada will soon make public the results of the national survey.
There is also the Canadian Tourism Commission, located in Vancouver, and it promotes tourism.
I'll stop now.
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