Canadian Armed Forces Housing

Opening Statement to the Standing Committee on Public Accounts

Canadian Armed Forces Housing

(Report 5—2015 Fall Reports of the Auditor General of Canada)

22 March 2016

Michael Ferguson, CPA, CA
FCA (New Brunswick)
Auditor General of Canada

Mr. Chair, thank you for this opportunity to discuss Chapter 5, Canadian Armed Forces Housing from our 2015 Fall Report. Joining me today is Gordon Stock, the Principal responsible for the audit.

In our audit of Canadian Armed Forces housing, we examined whether National Defence and its Canadian Forces Housing Agency had managed military housing in a manner that supported housing requirements, that was consistent with government regulations and policies, and was delivered in a cost effective manner.

I should note that the work for this audit was largely completed in September 2015, and we have not updated our findings since then.

We found that the Department had not determined who among members of the Canadian Armed Forces should be receiving housing, what form this housing should take, and where it should be located. We also found that National Defence did not comply with key aspects of its military housing policy. This policy states that National Defence can provide housing only in locations where there is an operational requirement, or where the private housing market cannot meet the needs of military members.

We found that National Defence did not consider whether the private market could meet the housing needs of Canadian Armed Forces members in some locations, although it had market analyses that showed members’ needs could be met in some urban locations like Halifax and Valcartier.

We noted that National Defence policy requires that rental rates for its housing units be in line with market rates to ensure occupants of military housing are treated equitably compared to members living in private market housing. National Defence policy also requires that affordability consideration should be implemented through compensation. This is consistent with government policy.

We found that to set rental rates, the Department used appraisal values set by the Canada Mortgage and Housing Corporation until the Corporation stopped providing this service in 2013. We noted that the Department had market analyses that showed rental rates for military housing in locations like Bagotville, Edmonton and Winnipeg were below market rates. This gap could provide occupants with financial benefits and thus create inequities between military housing and private housing occupants.

National Defence must also comply with the Queen’s Regulations and Orders under the National Defence Act, which take precedence over the National Defence policy. The Regulations may require National Defence to limit the rent charged in order to make housing more affordable. National Defence policy is not consistent with these regulations.

We recommended that the Department complete the review of its accommodation policy and clearly define its operational requirements for military housing.

Most of National Defence’s housing units were built between 1948 and 1960 and therefore require regular investment to maintain them. We found that while the Department had set a goal to modernize its housing portfolio, it had not developed plans that outlined the work, time and resources required to meet its goal. It also did not have up-to-date information about the condition of housing units.

The Agency spent about $380 million on military housing between the 2012–13 and 2014–15 fiscal years without a plan to guide its spending and without accurate information about the condition of units. As a result, it cannot ensure that funds spent on housing units were used effectively on the highest priorities.

The Canadian Forces Housing Agency must use its rental revenues only for operations and maintenance. Capital funds received from the Department are used for major renovations and new construction. We found that the timing of receipt of the capital funding did not always match the construction cycle. For example, in January 2015, it received $6 million of capital funding but had just two months left in the fiscal year to spend these funds. Receiving funds late in the fiscal year meant that work could be limited to lower-priority property improvements such as building fences or installing sheds.

We recommended that National Defence develop adequate plans that identify the work, time and resources needed to meet the current and future housing needs of CAF members, and ensure that it uses resources dedicated to military housing effectively.

We are pleased to report that National Defence agreed with our recommendations and committed to take corrective action.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the Committee may have. Thank you.