Portfolio organizations: Standing Committee on Government Operations and Estimates—November 16, 2020
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Canada Post: Renewal
Context
On August 21, 2020, Canada Post reported a $378 million loss before tax for its second quarter. On July 30, 2020, Canada Post announced a new acting chair of the Board of Directors.
Suggested response
- Canada Post has a long-standing mandate to serve all Canadians while remaining financially self-sufficient
- As the country responded to COVID-19, Canadians turned to Canada Post to provide an essential service
- Like in other areas, Canada Post felt the impact of COVID-19 on its services
- Increased losses are largely due to the significant impact COVID-19 had on revenue and costs, in addition to costs stemming from the June 2020 arbitrator’s ruling that resulted in new collective agreements with the Canadian Union of Postal Workers
- Canada Post continues to invest and evolve to meet the changing needs and expectations of Canadians
If pressed on governance:
- Ms. McDonald [Redacted]
- I want to thank Ms. McDonald for her contributions and for guiding the Corporation through a critical time in its operations
- during her tenure at Canada Post, as Chair and also as the Interim President, she played a vital role in overseeing Canada Post’s early steps toward a renewed vision to provide high-quality services at a reasonable price to Canadians, no matter where they live
- Canada Post is at a pivotal point as the mail and parcel delivery environment is rapidly evolving. Building on progress to date, I look forward to working with the next chair to continue charting the future path of one of Canada’s most valued service providers
If pressed on the acting chair:
- on July 30, 2020, Canada Post announced that Suromitra Sanatani had been appointed as acting chair of the Board of Directors
- Suromitra joined the board in May of 2018 and has played a key role with Canada Post, serving on the Human Resources and Compensation Committee as well as the Environmental, Social and Governance Committee
- her experience will continue to guide Canada Post improvements in areas such as safety and environmental performance
Background
Canada Post recorded a loss before tax of $378 million in the second quarter of 2020. This increased loss was largely due to the impact COVID-19 had on revenue and costs and the added costs stemming from the new collective agreements with the Canadian Union of Postal Workers (CUPW).
As the country responded to COVID-19, Canadians turned to Canada Post to provide an essential service. With people at home and businesses closed, the corporation saw a dramatic shift in what it was asked to deliver. Online shopping drove unprecedented growth in parcels volume and revenue, but because Canadians and businesses mailed and advertised less, the transaction mail and direct marketing volume and revenue decline exceeded the growth in parcels. The estimated total revenue shortfall due to COVID-19 was $46 million while increased costs related to COVID-19 were an estimated $118 million. The total negative financial impact due to COVID-19 was an estimated $164 million.
The arbitrator’s ruling on June 11, 2020 concluded a comprehensive process that followed weeks of rotating strikes in late 2018. The new collective agreements, one for urban employees and another for rural and suburban mail carriers (RSMCs), added net costs of $114 million in the second quarter. Most of this was related to expanded eligibility for post-employment healthcare benefits for RSMCs.
The segment recorded a loss before tax of $444 million on revenue of $3.3 billion for the first 2 quarters of 2020. That compares to a loss before tax of $27 million, also on revenue of $3.3 billion, for the first 2 quarters of 2019. Although COVID-19 and the new collective agreements with CUPW contributed to the loss, the Canada Post segment would have still incurred a loss without these factors.
Suromitra Sanatani: Acting chair of the Board of Directors
A seasoned corporate director, Suromitra is a board member of Travel Alberta and a member of the Royal Bank Global Asset Management Independent Review Committee. Previously, she served on various boards, including Edmonton International Airport, Victoria International Airport, Social Sciences Humanities Research Council of Canada, Canadian Blood Services, and as chair of the Royal British Columbia (BC) Museum.
Suromitra began her career in litigation before transitioning from the practice of law to senior corporate positions in the non-profit, public and private sectors. In her role as BC and Yukon Vice President of the Canadian Federation of Independent Business, Suromitra represented the interests of small- and medium-sized businesses.
Later, as Vice President, Corporate and Government Relations at Partnerships BC, she played a pivotal role in establishing this Crown Corporation, which specializes in public-private partnerships. Her subsequent consulting practice included leading First Nations consultations across British Columbia, and providing strategic advice to senior executives in the financial, utilities and transportation sectors.
Suromitra is fluent in English, French and German and has a conversational ability in Bengali. She has a bachelor of laws from the University of Ottawa and a bachelor of arts (French literature) from the University of Victoria.
Canada Post: Health and safety
Context
Canada Post continues to provide a vital service to Canadians under difficult circumstances, with employees continuing to operate in the field delivering parcels. Canada Post continues to do everything possible to continue its service while keeping the health and safety of its staff as its number one priority.
Suggested response
- Canada Post is closely monitoring the COVID-19 pandemic. It is taking steps to help keep its employees and the communities it serves safe, while closely following the guidance of the Public Health Agency of Canada
- Canada Post provides hand sanitizer for all customers and requires the use of masks in all post offices where provincial, municipal or local health authorities pass by-laws requiring their use in indoor public spaces and businesses
- Canada Post is working with its unions, in order to ensure employees and the public are protected
If pressed on health and safety:
- Canada Post is taking action to protect employees and customers, including:
- enhanced cleaning in all of its facilities, extra safety supplies for employees and staggered shifts which minimize everyone arriving at work and having their breaks at the same time. This also allows for enhanced physical distancing in the workplace
- priority service at its retail post offices to those at a higher risk, such as seniors, during the first hour of each day
- installing signage and floor decals to encourage physical distancing, limiting the number of customers in smaller offices, and installing clear barriers at the counter to increase safety
- suspending its normal 15-day hold period and asking that customers who are ill or self-isolating delay their visit and pick up their parcel only when it’s safe to do so
- implemented a new process called “Knock, drop and go” to minimize contact with the delivery agent by eliminating signatures at the door
If pressed on volume and delays:
- Canada Post has been experiencing sustained, high volumes during this pandemic
- the employees of Canada Post are working hard to ensure deliveries continue to reach Canadians during this crisis, and we value their dedication
If pressed on peak season health and safety measures:
- Canada Post has followed the guidance of public health officials at the national and local level throughout the year to keep their people, and the communities they serve, safe
- they have also ensured to follow the various public health guidelines in every community they serve. Their commitment to safety, which includes physical distancing in all facets of their operations including delivery, will continue throughout the busy holiday season
- they will apply the learnings from providing an essential service throughout this challenging year into their peak holiday plans and continue to follow the guidance of public health officials
- Canada Post will continue to put the safety of their employees and the people they serve first as they respond to the significant holiday parcel demand
Background
On March 19, 2020, Canada Post released a letter stating its number one priority is the health and safety of its employees. They encouraged employees who can work from home to do so. However, the majority of its employees are in the field delivering packages.
Canada Post has eliminated the need for customers to sign for parcels at the door to minimize personal contact. It has also suspended normal delivery guarantees for its parcel services as delivering safely without overburdening its employees requires more time.
Canada Post has been experiencing “Christmas level” volumes during this pandemic. Canada Post has introduced several measures to encourage physical distancing and limit contact during the COVID-19 pandemic, including a “Knock, drop and go” approach for parcel delivery. This change eliminates the need for signatures at the door, speeds up delivery and has greatly reduced the number of parcels sent to post offices for pickup. Items that require signatures due to proof of age will be required to be picked up at the retail counter in a more controlled environment, where physical distancing can be accommodated.
Additional safety measures
On October 9, 2020, Canada Post communicated additional safety measures to all employees:
- requirements across the country:
- all employees, visitors and contractors in Ontario are required to wear a face covering on Canada Post premises in any situation or location where physical distancing cannot be maintained, even briefly. Adopting this standard reflects Ontario’s recently enacted face covering requirements
- all employees, visitors and contractors in other areas of the country with high levels of community spread as determined by local or provincial authorities (such as Quebec red zones), are strongly recommended to wear a face covering when in Canada Post premises. This includes any situation or location where physical distancing cannot be maintained, even briefly
- all employees, visitors and contractors working in other areas are recommended to wear a face covering in any situation or location where physical distancing cannot be maintained, even briefly
- requirements for all employees:
- all employees, visitors and contractors across Canada are required to carry a face covering with them at all times. This measure allows them to put on their face covering promptly in situations when physical distancing is suddenly challenging or impossible to maintain
All employees across Canada are now required to conduct a self-assessment each day before reporting to work, based on a COVID-19 self-assessment tool from the Public Health Agency of Canada.
These measures are in addition to the existing requirements to wear face coverings in enclosed public spaces, as well as for 2-person lifts, during driver training, on elevators, etc. These measures also do not replace the requirement to maintain 2 metres of physical distancing, which remains the best way to prevent the spread of COVID-19.
Rehabilitation of the National Capital Commission assets including 24 Sussex, Harrington Lake, and Stornoway
Context
The Official Residences of Canada: Asset Portfolio Condition Report, identified a requirement for a one-time injection of $83 million over 10 years to address the deferred maintenance deficit for all 6 official residences and ensure that the official residences meet universal accessibility and sustainability requirements.
Note
The numbers in the asset condition report represent recommended and projected investments based on 2017 asset values, not actual expenditures/commitments/planned spending by the National Capital Commission (NCC). The NCC is working to have this report refreshed to reflect 2020 values.
Suggested response
- The NCC is an independent Crown Corporation and is responsible for year-round maintenance and operations for the 6 official residences in Canada’s National Capital Region (NCR)
- The NCC recognizes the significance of the official residences and are committed to working with its partners to ensure that issues related to security, heritage preservation, sustainability, and accessibility are addressed
- The NCC is working with federal partners to develop a plan for the future of 24 Sussex to enable the government to make a prudent and informed decision
- Our goal is to ensure that all aspects of the rehabilitation are taken into consideration, including health and safety (for example removal of hazardous materials, including asbestos), security, functionality, accessibility, design excellence and heritage preservation
- The NCC is committed to full transparency and reports annually on capital expenditures incurred at the official residences
If pressed on Harrington Lake rehabilitation costs:
- the NCC’s work at Harrington Lake is part of a broader program to preserve, maintain and restore all official residences under NCC management
If pressed on the NCC’s Asset Portfolio Condition Report:
- both the Government of Canada and the NCC recognize the importance of official residences of Canada, their heritage and cultural value
- that is why the NCC commissioned the 2018 report entitled Official Residences of Canada: Asset Portfolio Condition Report, detailing the investment required for the restoration of several of Canada’s official residences
- the NCC released this report in 2018 to remain transparent and open with both the Government of Canada and the Canadian public. The NCC is working to have this report refreshed to reflect 2020 values
- the NCC is committed to working with its partners to ensure that issues related to security, heritage preservation, sustainability, and accessibility are addressed
Background
Official residences of Canada Asset Portfolio Condition Report
In 2017, the NCC commissioned in-depth building condition reports for the largest and most complex buildings in the official residences portfolio. These reports found that 58% of the assets in the official residences portfolio were considered to be in ‘poor’ to ‘critical’ condition, including half of the main official residences (24 Sussex and Harrington Lake main cottage are in critical condition while the farm is in poor condition). The complete report, Official Residences of Canada: Asset Portfolio Condition Report, was endorsed by the NCC Board of Directors in April 2018 and publicly released in October 2018.
The report reflects an in-depth analysis of the official residences asset portfolio and highlights the shortfall in funding required to restore and maintain these heritage buildings.
24 Sussex
On October 16, 2018, the NCC released the Official Residences of Canada: Asset Portfolio Condition Report, which found that 24 Sussex Drive was in “critical” condition. The report identified a requirement for a one-time injection of $83 million over 10 years to address the deferred maintenance deficit for all 6 official residences, and a further $24.6 million annually for ongoing maintenance, repairs and renovations. The implementation of this 10-year recapitalization plan would also need to consider the investment required to ensure that the official residences meet universal accessibility and sustainability requirements, as well as escalation.
Over the last decade, the NCC has completed significant work at 24 Sussex including the rehabilitation of chimneys and fireplaces, fire compartmentalization, stabilization of the escarpment at the back and west sides of the property and the removal of hazardous materials, including asbestos, from the main building. However, it has not been able to proceed with the extensive rehabilitation of the residence and has been limited to completing work on the repairs relating to health and safety that were urgently required.
As 24 Sussex Drive has not seen significant investment in over 60 years, the additional work required would include the rehabilitation of the building envelope, mechanical and electrical systems, all buildings on the site would require extensive recapitalization and NCC would need prolonged access to the residence. The NCC is working with its federal partners to develop a plan for the future of 24 Sussex Drive and is ensuring that issues related to security, functionality, environmental sustainability, universal accessibility, design excellence and heritage preservation are taken into consideration in our preparations.
As part of its duties as steward of the official residences, the NCC is renewing various studies, including functional program options for the building, site surveys of the grounds, the main building and the 4 ancillary buildings, asbestos testing and other life cycle evaluations.
Harrington Lake
While the main cottage at Harrington Lake is 95 years old, most of the buildings were built between 1850 and 1925. Harrington Lake, the official country residence of the Prime Minister, is used for both official and private functions, with buildings that can accommodate official business as well as state visits. The Harrington Lake property was deemed to be in critical condition in the NCC’s 2018 Official Residences of Canada: Asset Portfolio Condition Report (see pages 38 to 43). In October 2018, the NCC began the rehabilitation of this property.
On September 24, 2020, it was alleged that through the tabled response to OPQ Q-443, parliament had been provided with figures that were inaccurate, based on information released through an associated Access to Information and Privacy (ATIP) (number 2020-00025) with regard to construction and renovations at the Prime Minister’s country residence and surrounding property at Harrington Lake.
Note
OPQ Q-443 and the associated ATIP 2020-00025 address substantially different questions—one about the $8.6 millions estimated for the renovation and construction costs for almost 5 years of work; the other about the actual total expenses incurred by the NCC over the first four and a half months of 2020, which was misinterpreted by the Canadian Taxpayer’s Federation to total more than $10 million worth in expenses at Harrington Lake.
On May 25, 2020, the following 3 projects, with a total estimated cost of $8.6 million, were detailed in response to OPQ-443:
- main cottage rehabilitation which began in September 2019 and is scheduled to be completed in December 2020, with an estimated project cost of $6.1 million:
- Harrington Lake last saw major capital investment during the 1950s (over 60 years ago); the main cottage has not seen any investment since 2005, when the NCC made critical repairs to the roofing, eavestroughs, piping, electrical, mechanical and structural systems of the property
- the demolition of the lower guest cottage, which was completed in winter 2018 and had a total project cost of $24,000
- the farmhouse (formerly the caretaker’s house) rehabilitation project which began in October 2018 and was completed in June 2019 and had an estimated project cost of $2.5 million
- prior to this work, the building had been closed since 2008 due to health and safety concerns; it was in need of complete rehabilitation to prevent further deterioration and restore usability
In responding to the point of order raised on September 24, 2020, the NCC prepared documentation showing the corporation’s actual expenditures on these 3 projects, for fiscal years 2016 to 2017 to 2019 to 2020, as well as the forecast amounts for 2020 to 2021 (these amounts exclude salaries).
| Rehabilitation project | Total of actual costs (2016 to 2017 to 2019 to 2020) | 2020 to 2021 forecast | Total cost forecast |
|---|---|---|---|
| Cottage main buildingtable 1 note 1 | $1,400,217 | $4,717,783 | $6,118,000 |
| Farmhouse building | $2,111,165 | $388,835 | $2,500,000 |
| Lower guest cottage | $23,681 | $0 | $23,681 |
| Grand total | $3,535,063 | $5,106,618 | $8,641,681 |
Table 1 Notes
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The NCC spent a total of $3.535 million on these projects between fiscal years 2016 to 2017 and 2019 to 2020, with projected costs of $5.107 million in 2020 to 2021, for a total estimated amount of $8.642 million in expenditures for these 3 projects. The expenses incurred by the NCC fall within the estimate provided in Q-443.
Stornoway
Originally built in 1913 to 1914, Stornoway holds a “recognized” heritage designation. The main residence functions primarily as a private residence for the leader of the opposition and their family. It also hosts occasional official events. It is not open to the public. The property comprises 0.42 hectares of grounds, a main residence, and a garage.
Since 1988, development plans, supported by asset condition reports for both the building and grounds, have been completed and several upgrades have been made. There are a number of building systems that need to be replaced or upgraded (for example plumbing, heating and cooling equipment), the presence of asbestos complicates any interior work, and aspects of the residence need to be renovated to permit universal accessibility. Overall, Stornoway was determined to be in good condition in the NCC’s 2018 Official Residences of Canada: Asset Portfolio Condition Report (see pages 44 to 49).
Transition periods between residents provide the NCC with an opportunity to complete required life-cycle work and maintenance that is unrelated to the previous or incoming resident. As such, the NCC is using the current transition period at Stornoway to complete required life-cycle maintenance and repairs, including work in the kitchen (new dishwasher, countertop and backsplash, replacing end-of-life wood flooring with ceramic), the basement (insulation, heating pipe repairs), bathrooms (plumbing repairs, replace exhaust fans), general décor (refresh paint and upholstery, replace mattresses), and some exterior repairs (repairs to rot in veranda and main entrance wood trim, gutter repairs, replace garage roof).
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