Controlling Exports at the Border and Canadian Armed Forces Housing

Opening Statement to the Senate Standing Committee on National Security and Defence

Controlling Exports at the Border

(Report 2—2015 Fall Reports of the Auditor General of Canada)

Canadian Armed Forces Housing

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

22 February 2016

Nancy Cheng, FCA
Assistant Auditor General

Mr. Chair, thank you for this opportunity to discuss two reports that were recently presented to Parliament. I am accompanied by Nicholas Swales, Principal responsible for Report 2Controlling Exports at the Border and by Gordon Stock, Principal responsible for Report 5—Canadian Armed Forces Housing.

Let me begin with our report on controlling exports at the border. Exports are vital to Canada’s economy, but are controlled to achieve a range of policy objectives including national security. Several federal entities play a role in controlling exports, but the Canada Border Services Agency is the last line of defence to prevent goods that contravene Canada’s export laws from leaving the country.

Our audit focused on whether the Agency had what it needed to implement its export control enforcement priorities, prevent the export of goods that contravened Canada’s export laws, and facilitate legitimate trade.

We found weaknesses in the information, practices and authorities the Agency applied to assess export risks, assign its resources, and act on its priorities. As a result, the Agency missed opportunities to stop some goods that did not comply with Canada’s export control laws from leaving the country.

For example, the Canada Border Services Agency relied on export declarations to identify and examine high-risk shipments, but was unable to review all the declarations it received. We noted that it was not able to review export declarations received on paper as rigorously as those received electronically. Even when the Agency flagged shipments as high-risk, it did not examine about 1 in 5.

We also noted some systematic gaps in coverage. For example, as a result of staffing challenges, the Agency did not conduct any examinations of parcels leaving Canada at one large processing centre.

We also looked at the impact that the Agency’s export control activities had on legitimate trade. We found that the number of legitimate export shipments that were delayed by the Agency to carry out its control activities was very small compared to total exports. However, the Agency did not process 11 percent of temporarily detained shipments in a timely manner.

Mr. Chair, we are pleased that the Canada Border Services Agency has agreed with our recommendations.

Let me now turn to the second report of interest today on Canadian armed forces housing. This audit focused on whether National Defence and its Canadian Forces Housing Agency had managed military housing in a manner that was consistent with government regulations and policies, supported housing requirements, and was cost effective.

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

We also found that National Defence did not consider whether the private market could meet members’ housing needs in some locations, although it had market analyses that showed they 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. We noted that the Department had market analyses that showed that rental rates for military housing were below market in some locations. In the past, the Department used appraisal values set by the Canada Mortgage and Housing Corporation until it stopped providing this service in 2013.

Most of National Defence’s housing portfolio was built between 1948 and 1960 and needed renovation and updating. We found that the Department had set a goal to modernize its portfolio, but had not developed plans that set out the work, time and resources required to meet this goal. It also lacked up-to-date information about the condition of housing units.

About $380 million was spent on military housing between the 2012–13 and 2014–15 fiscal years. Without a plan to guide its spending and accurate information about the condition of units, National Defence cannot ensure these funds were used effectively on the highest priorities.

The timing of receipt of capital funding for major renovations from National Defence did not always match the construction cycle. For example, the Agency received $6 million in January 2015 and did not have enough time to allocate funds to significant and highest-priority work.

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.