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Minister’s Message

As Minister of National Defence, I am honoured to present to Parliament the 2006–2007 Departmental Performance Report. This document provides a comprehensive overview of activities and expenditures for the reporting period of 2006–2007. 

This has been an exciting and challenging year at National Defence, in which the Department and Canadian Forces continued their important work to protect Canadians at home, defend North America in cooperation with the United States, and defend Canadian interests abroad.

Here at home, we took the first steps in implementing our Canada First defence strategy by initiating a number of major acquisition projects that will enchance the mobility and deployability of the Canadian Forces. With the help of the $5.3 billion in new defence funding over five years announced in Budget 2006, Canada will acquire four strategic airlift aircraft and 17 tactical airlift aircraft, 16 medium- to heavy-lift helicopters, 2,300 new medium-sized logistics trucks and associated equipment, and three joint support ships. I am very proud to say that in August 2007, within about a year of announcing our initial plans to acquire a strategic airlift capability, our air force saw their first C-17 on the tarmac at 8 Wing Trenton. This is a perfect example of how we are working to get the Canadian Forces what they need, when they need it. The Canada First defence strategy will deliver a three-ocean navy, a robust army, a revitalized air force, and responsive special operations forces that will allow the Canadian Forces to provide more security at home and have a greater impact abroad.

Budget 2007, which was also tabled during the reporting period, reaffirmed the investments announced in Budget 2006 and moved $175 million from expenditures planned in 2009–2010 to the coming fiscal year to accelerate the implementation of the Canada First defence strategy. 

In addition to acquiring new equipment, growing the Regular and Reserve forces remains one of our top priorities. Despite challenges, the Regular and Reserve forces each grew by approximately 1,000 personnel during the reporting period. This included a 53 percent increase in the number of clinical officers (physicians, nurses, dentists, pharmacists and social workers) on the Health Services Primary Reserve List.

Building on the strength of our defence relationship with Canada’s most important ally, the United States, National Defence also began the process of implementing NORAD’s new maritime warning function, which was established when the Agreement was renewed in perpetuity in May 2006. This new mission will enhance the ability of Canada and the US to track and respond to sea-borne threats before they reach the shores of our continent. 

The ongoing mission in Afghanistan remained the primary operational focus of the Canadian Forces in 2006–2007. The approximately 2,500 CF members currently serving as part of Joint Task Force Afghanistan continue to play a key role in the NATO-led International Security Assistance Force mission, which is working to improve the security situation in Afghanistan and assist in rebuilding the country. We are making progress – unthinkable only a few years ago – which is a testament to the will and fortitude of the Afghan people, as well as the commitment and engagement of Canada and the rest of the international community. For example, the Canadian Forces’ ongoing efforts to construct a new two-lane road linking the Panjwayi district with Highway One in the north will be a huge development for the area. It will allow farmers to transport their produce to bigger markets, doctors from the major urban centres to visit villages where there is no medical service, and police and army personnel to respond to crises where and when they arise. Our combat engineers have been working with local construction crews to build this road, while our soldiers have been working to protect them. This project represents just one of many signs of progress in Afghanistan that has been a direct result of Canadian involvement.

To protect our country, the Canadian Forces rely on the dedication and commitment of all members of the Defence team – both military and civilian. I am proud to lead this vital institution. I look forward to continuing my work with Canadians and Members of Parliament and the Senate to further enhance the Forces and provide ongoing support to our courageous men and women in uniform.

The Honourable Peter G. MacKay, PC, MP
Minister of National Defence

Management Representation Statement

I submit for tabling in Parliament, the 2006–2007 Departmental Performance Report (DPR) for the Department of National Defence. This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2006–2007 Estimates: Reports on Plans and Priorities and Departmental Performance Reports:

• it adheres to the specific reporting requirements outlined in the Treasury Board Secretariat (TBS) guidance;
• it is based on the department’s approved Program Activity Architecture (PAA) as reflected in its Management, Resources and Results Structure (MRRS)
• it presents consistent, comprehensive, balanced and reliable information;
• it provides a basis of accountability for the results achieved with the resources and authorities entrusted to Defence; and
• it reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.

Robert Fonberg
Deputy Minister

Section I: Departmental Overview

Raison d'être Raison d’être

The Defence Mission

The organizations of the Defence portfolio[1] (including but not limited to the Canadian Forces) have a mission to defend Canada and Canadian interests and values while contributing to international peace and security.

Under Canadian defence policy, the Canadian Forces have three roles:

• Protect Canadians at home and defend our sovereignty;
• Defend North America in co-operation with the United States; and
• Contribute to international peace and security.

The Defence Portfolio

The Defence portfolio is comprised of the Department of National Defence (DND) and the Canadian Forces (CF). The CF is comprised of Environmental Commands (Maritime Command, Land Forces Command, Air Command), Operational Commands (Canada Command, Canadian Expeditionary Force Command, Canadian Special Operations Forces Command, Canadian Operational Support Command) and a Functional Command (Military Personnel Command). The Defence Portfolio also includes a group of related organizations and agencies, including the Communications Security Establishment (CSE) and Defence Research and Development Canada (DRDC).

The CF also maintain the following:

• A police service, comprising the Military Police and the National Investigation Service, operating under the technical supervision of the Canadian Forces Provost Marshal;
• A military justice system administered under the superintendence of the Judge Advocate General
• Chaplaincy services;
• Extensive communications networks in Canada and abroad;
• Firefighting services;
• Medical and dental services for CF members, who are excluded from both the Canada Health Act of 1984 and the Public Service Health Care Plan;
• Youth programs, specifically the Canadian Cadet Program and the Junior Canadian Rangers;
• The Canadian Defence Academy;
• The Canadian Forces Grievance Authority;
• The Canadian Forces Housing Agency; and
• The Canadian Forces Personnel Support Agency.

Defence also includes the following organizations that report directly to the Minister of National Defence:

• The Office of the Judge Advocate General;
• The Office of the Ombudsman for the Department of National Defence and the Canadian Forces;
• The National Search and Rescue Secretariat; and
• The Office of the CSE Commissioner.

The National Defence Act establishes DND and the CF as separate entities operating in close co-operation under the authority of the Minister of National Defence. As well as the National Defence Act, the Minister of National Defence is responsible for the administration of the statutes, regulations and orders listed at Appendix C. The National Defence Act also establishes a Deputy Minister who is responsible for policy, resources, interdepartmental co-ordination and international defence relations, and designates the Chief of the Defence Staff, the senior serving officer of the CF, as the person “… who shall, subject to the regulations and under the direction of the Minister, be charged with the control and administration of the Canadian Forces.”[2]

The Canadian Forces Grievance Board and the Military Police Complaints Commission report to the Minister of National Defence although they are not part of the Department of National Defence. This reporting arrangement and organizational status are designed to ensure accountability while maintaining the arm’s-length relationship required to prevent conflicts of interest.

Specific accountability for results and associated performance measurement areas at the level of the Assistant Deputy Ministers and the Environmental Chiefs of Staff are set out in detail in the Defence Plan. The National Defence Headquarters organization chart is found in Section III.

Key Partners and Stakeholders

Defence works with many Canadian and international partners that help support its mission, programs and activities. The broad scope of the Defence mandate is reflected in the complexity and diversity of its partners and stakeholders, listed in Appendix B.

Departmental Resources

Defence used the PAA structure for the first time throughout the entire fiscal year 2006–2007. A considerable amount of effort was expended to operationalize Defence’s PAA. Changes were made, for example, through the following:

• educational initiatives, such as presentations to DND/CF personnel including Senior Level Business Planners and Comptrollers;
• planning initiatives, by structuring business planning financial information according to the PAA structure;
• process oversight, by refining original Cost Centre and project attributions to the PAA sub sub activities and tracking any subsequent Senior Level attribution changes;
• process management, by defining a process for creating new cost centres and refining the attribution process; and
• technical enhancements, by developing the Financial Decision Support software with Defence’s Finance and Corporate Services Group to extract and report financial data according to the PAA structure.

Despite the progress made, given the size and complexity of Defence, there is room for improvement. As the PAA matures, Defence expects to encounter new challenges with adapting the planning processes and creating the internal competencies and external comprehension to implement the MRRS policy within Defence. Through the collaborative efforts of the key internal and external stakeholders, Defence has confidence that the efforts made to implement the PAA will ensure that we are reporting results and spending to enhance accountability and transparency to Canadians.

Total Financial Resources for Fiscal Year 2006–2007

($ Thousands)	Planned Spending 2006–2007	Total Authorities 2006–2007	Actual Spending 2006–2007
Departmental Spending	$15,463,816	$15,922,439	$15,682,631
Capital Spending (included in departmental spending)	$2,499,609	$2,513,788	$2,382,630

Source: Assistant Deputy Minister (Finance and Corporate Services) Group

Human Resources

	Planned 2006–2007	Actual 2006–2007
Military (Regular Force) 4	63,461	63,7791
Civilian	24,169	24,4192
Total3	87,630	88,198
Notes: Actual FTE count is based on the approved PAA and reported according to the three Program Activities for Defence. Some of the FTEs in the missing cost centres have been accounted for by estimating the FTEs in these areas and attributing them to Generate and Sustain Integrated Forces. These FTE numbers are derived from a representative financial formula, as there is no consistent 1:1 relationship between FTEs and programs. A breakdown of FTEs by Program Activity can be found in Section III: Tables 17, 18 and 19. Class C Reserve numbers are not included in 2006–2007 Military (Regular Force) planned and actual figures. For information on the Reserve Strength see Section II, page 41.

Sources: Vice-Chief of the Defence Staff Group, Chief Military Personnel Group and Assistant Deputy Minister – Human Resources (Civilian) Group

Departmental Performance

The effectiveness by which Defence utilized its resources for the 2006–2007 DPR was assessed through an assembly of Level 1[3] organizations performance information/systems as well as a central Performance Management Framework consisting of a Balanced Scorecard that is maturing over time. Each Level 1 organization uses a sign-off process based on their areas of responsibility in submitting their respective performance information for the DPR, which undergoes central staff review to ensure consistency. During fiscal 2006–2007, the department continued to ensure that resources were allocated based upon current priorities and requirements. While current operations remained the number one priority, any additional resources made available through programme adjustments were assigned using the department’s Programme Management Board governance process. In addition, Defence tracked its corporate strategic objectives through the Balanced Scorecard that is reviewed by senior management at regular intervals throughout the fiscal year.

Status on Departmental Performance

Strategic Outcome: Canadians’ Confidence that DND and the CF have relevant and credible capacity to meet defence and security commitments.
Alignment to Government of Canada Outcomes: Social Affairs – Contributes to safe and secure communities; International Affairs – Contributes to a strong and mutually beneficial North American partnership.
			2006-2007
Status on Performance			Planned Spending	Actual Spending
Program Activity – Generate  and Sustain  Relevant, Responsive and Effective Combat- Capable Integrated Forces	Corporate Priority 1: Transform and Modernize the CF * (New) Adopt a fully integrated and unified approach aligning force structure to ensure operational effectiveness. Key initiatives include the development of Canada COM), six Area Joint Task Forces, CEFCOM, CANSOFCOM, CANOSCOM, MILPERSCOM, a Strategic Joint Staff, a Rapid Reaction Force, Mission Specific Task Forces and a managed readiness system to enhance its ability to generate and deploy integrated forces; and * (Ongoing) Adopt an integrated and strategically driven force development framework and process, including expanding the Regular and Reserve forces, ensuring they are well trained and well equipped, and developing a diverse and highly motivated Defence Team. Foster Management Excellence in the Defence Institution * (New) Enhance strategic investment planning*and accelerate the activities of procurement reform**; and * (New) Ensure successful implementation of modern comptrollership initiatives* and the Public Service Modernization Act*.	Performance  Status: Exceeded Expectations Note: See pages 8, 19-20 and 24-30 for the result discussions in the document. Successfully Met Note: See pages 13-16, 19-20 and 30-47 for the result discussions in the document. Successfully Met * and Not Met ** Note: See pages 20-21 and 47-55 for the result discussions in the document. Exceeded Expectations* Note: See page 21 for the result discussions in the document.	$12,561,091	$12,452,034
Strategic Outcome: Success in assigned missions in contributing to domestic and international peace, security and stability.
Alignment to Government of Canada Outcomes: Social Affairs – Contributes to safe and secure communities; International Affairs – Contributes to a safe and secure world through international cooperation and a strong and mutually beneficial North American partnership.
			2006-2007
Status on Performance			Planned Spending	Actual Spending
Program Activity Conduct Operations	Corporate Priority 1: Protect Canadians through the Conduct  of Operations * (Ongoing) Conduct  operations at home and abroad; and * (Ongoing) Enhance operational partnerships with other government departments, key security agencies and allies.	Performance  Status: Exceeded Expectations Note: See pages 19 and 55-64 for the result discussions in the document. Exceeded Expectations Note: See pages 19 and 55-64 for the result discussions in the document.	$1,974,706	$2,355,403
Strategic Outcome: Good governance, Canadian identity and influence in a global community.
Alignment to Government of Canada Outcomes: Economic Affairs – Contributes to an innovative and knowledge-based economy; Social Affairs – Contributes to a vibrant Canadian culture and heritage; and International Affairs – Contributes to a safe and secure world through international cooperation and a strong and mutually beneficial North Americanpartnership. Government Affairs - Contributes to a lesser degree to this Government of Canada outcome area.
			2006-2007
Status on Performance			Planned Spending	Actual Spending
Program Activity Contribute to Canada and the International Community	Corporate Priority 1: Contribute to the International  Community in Accordance with Canadian Interests  and Values * (Ongoing) Expand strategic partnerships with key security departments and other government departments and agencies; and * (Ongoing) Continue to strengthen defence and security arrangements with the United States to enhance domestic and continental security, and with Canada’s allies to enhance international security.	Performance  Status: Exceeded Expectations Note: See pages 21-22 and 64-70 for the result discussions in the document. Exceeded Expectations Note: See pages 21-22, 70-72 and 80-83 for the result discussions in the document.	$928,019	$875,194
Note: 1.  A “cross walk” table showing the relationship between Corporate Priorities for Defence and Program Activities can be found on page 23.

Source: Vice-Chief of the Defence Staff Group

Summary of overall performance

During fiscal 2006–2007 National Defence has been very active in accomplishing its mission “ To Defend Canada and Canadian interests and values while contributing to international peace and security”. A summary of the results in achieving the mission along three Program Activities follows.

Generate and Sustain Relevant, Responsive, Effective Combat-Capable Integrated Forces

During fiscal 2006–2007, Defence was able to sustain the operational tempo for both planned and contingency operations at appropriate readiness levels and generate surge forces to meet unexpected demands. As part of CF Transformation, Defence stood up two Regional Task Forces – Atlantic and Pacific providing Canada with a navy capable of operating off the East and West coasts as well as the Arctic. Furthermore, the nuclei of Territorial Defence Battalion Groups have been established across Canada. The air force continued to provide the military aerospace power to defend Canada and North America, and to deploy alongside allies and coalition partners.

Defence, through the Canadian Special Operations Forces Command (CANSOFCOM), developed the capability to rapidly deploy joint formations, an immediate response capability and mission specific task forces capable of acting alone or in support of Canada COM, CEFCOM, or allied forces.

The CF continuously sustained a combat-effective, sustainable armed force and provided approximately 2,500 CF members, including 300 Class C Reservists, on two rotations to the NATO Joint Task Force in southern Afghanistan for a total of approximately 5,000 CF members.

The ability to generate and sustain high-readiness forces to meet defence and security commitments required Defence not only to create a responsive organizational structure but also provide the support capability to develop and sustain an effective, professional Defence team. These objectives were met through many initiatives undertaken to recruit and retain military members. Defence also responded to the recommendations made by the Standing Committee on Public Accounts (SCOPA) on military recruitment and retention. Recruitment efforts are also underway to align the growth of the civilian workforce with departmental strategic priorities.

The need to give our troops the tools they require to fulfill their missions, to protect them from harm and be interoperable with our closest allies — particularly the US and the North Atlantic Treaty Organization (NATO) alliance — defined the requirement for capital acquisitions. Many new projects were initiated or progressed, during the reporting year, to modernize and transform the CF. Detailed information on this capability program can be found in Section II – Analysis of Program Activities by Strategic Outcomes.

Conduct Operations

Defence met the requirement to conduct operations effectively at home and abroad by providing efficient, professional maritime, land, air and special operations forces, supported by many partners and agencies.

Defence conducted operations to detect, deter, prevent, pre-empt and defeat threats and aggression aimed at Canada and North America while maintaining ready duty ships, high readiness aircraft, immediate response units and two Maritime Security Operation Centres. Defence maintained constant situational awareness through the Joint Information and Intelligence Fusion Capability (JIIFC) project. The JIIFC project made significant progress during fiscal 2006–2007 towards defining the CF command and control requirements for the fusion of operational information. The Communications Security Establishment (CSE) also supported government policy-making and protected Canadians by providing key departments with foreign signals intelligence that contributed to operations and enhanced constant situational awareness of the defence, security and international affairs environments.

During fiscal 2006–2007, over 8,700 search and rescue operations were conducted in cooperation with other government departments, of which 1,268 incidents involved the tasking of CF resources in 2006[4]. CF operations also consisted of humanitarian assistance and intense planning during flood and forest fire relief operations.

Defence contributed to Canadian sovereignty in the North by bolstering the surveillance and response capabilities in the region, maintaining a presence on the ground and in the air, and by continuing to enhance the CF’s maritime presence.

The CF actively participated in a variety of international missions and operations during fiscal 2006–2007. The CF engaged in 21 distinct international missions ranging from peace keeping operations in the Democratic Republic of Congo, Sudan, Sierra Leone, Cyprus, several in the Middle East, Bosnia Herzegovina and maritime missions in both international and continental theatres. Canada’s contribution to the international campaign against terrorism in Afghanistan remained the primary operational focus of the Canadian Forces. As part of a “whole of Government” approach to Afghanistan, Defence worked hand-in-hand with other government department partners and the NATO ISAF mission to further overall Canadian and international community objectives.  These included, for example, assisting the extension of Afghan Government authority, developing the security structures needed to maintain security without assistance of international forces, and contributing to the development of a stable and secure environment where sustainable development and reconstruction can take hold. Canada’s military efforts were principally focused in Kandahar Province, where the CF were responsible for disrupting Taliban sanctuaries, lines of communication and leadership effectiveness. Canadian efforts considerably lowered the threat against Kandahar City and have brought rejuvenated commerce and community to the Panjwayi and Zhari Districts, assisted the resettlement of internally displaced people, improved road networks, and facilitated a number of DFAIT and CIDA projects in the south.  CF Operational Mentoring Liaison Teams were also highly successful, as evidenced by the rapid integration of the first Afghan National Army battalion into ISAF security operations.

Contribute to Canadian Government and Society, and the International Community, in Accordance with Canadian Interests and Values

Defence provided advice to the Government of Canada on a wide range of security and defence issues; exploited opportunities to form and improve strategic partnerships with an array of government departments and international allies; strengthened Canada’s defence relationship with the United States, including the renewal in perpetuity of the NORAD Agreement; and contributed to Canada’s academic community through the Security and Defence Forum. Defence also continued to contribute to Canadian society through its research and development program, and as one of the country’s largest employers. In addition, Defence contributed to Canadian society through regional industrial benefits arising from a wide variety of procurement projects and other investments. During fiscal 2006–2007, DND and the CF also made a significant contribution to global security, especially in Afghanistan, the primary focus of CF deployed operations.

Influences on Departmental Performance

A number of internal and external factors influenced Defence performance during fiscal 2006–2007.

External Factors

International Security Environment 

The international security environment in 2006-2007 remained complex and unpredictable. While the likelihood of major inter-state wars remained low, the requirement for the international community to monitor and respond to regional flashpoints in the Middle East, Africa, South Asia and East Asia persisted. Failed and failing states continued to fuel regional instability. Although anti-terrorism operations have disrupted the leadership of al-Qaeda, international terrorism has evolved into a global movement of militant Islamic groups and individuals, and will remain a serious threat for many years to come. Terrorist groups continue to reach out to new recruits, and the radicalization of homegrown extremists is an increasingly dangerous threat. The possibility that terrorists will obtain and use weapons of mass destruction also remains a major security concern. The international security situation has also been affected by tension over the nuclear programs of North Korea and Iran.

Changing Socio-politico-economic Conditions at Home and Abroad

Throughout fiscal 2006–2007, the global economy continued to grow, especially in the developing world. Many countries experienced an increasing demand for commodities such as oil and gas that pushed prices up. Soaring energy prices increased the operating costs of organizations around the world, including armed forces, while producing windfall profits for supplier states. Ethnic and religious tensions continued to plague many states.

Internal Factors

Significant internal factors included: the new money allocated to Defence in Budget 2006; government initiatives to improve efficiency throughout the bureaucracy; the continuation of efforts to transform and modernize the CF; and various evaluations and recommendations from committees of Parliament and the Auditor General.

The Defence Budget

Budget 2006 increased allocations to Defence by $5.3 billion over five years. The accompanying Budget Plan contained several specific DND/CF initiatives, including the following: improve base infrastructure and housing; acquire the equipment needed to support multi-role, combat-capable maritime, land and air forces; increase the capacity of the CF to protect Canada’s Arctic sovereignty and security; and start establishing reserve based Territorial Defence Battalion Groups for home defence. Budget 2007, which was also tabled during the reporting period, confirmed the Defence investments announced in Budget 2006 and moved $175 million from the 2009–2010 spending plan to the 2007–2008 spending plan to accelerate implementation of the Canada First defence strategy.

Budget 2006 and Budget 2007 Defence Funding allocations ($ Millions)
	2006–2007	2007–2008
Budget 2006:
Canada First	400	725
RCAF Memorial Museum	1	0
Budget 2006 Allocation	401	725
Budget 2007:
Canada First	0	175
Total Budget2006 and 2007 Allocation	$401	$900

Source: Vice Chief of the Defence Staff Group

The Budget 2006 funding for fiscal 2006–2007 was allocated to:

• increase operating budgets for training and operational readiness, including funding for priorities such as fuel and utilities, and infrastructure maintenance and repair.
• increase support to operations in Afghanistan, with the majority of this amount allocated to spare parts, repairs and other critical supply activities.
• correct shortages of critical supplies and repair services in all areas of the CF. This funding helped DND meet availability targets for some critical fleets and prolonged the sustainability of existing capabilities.
• cover the launch of work related to the Canada First initiatives for defence of and assertion of sovereignty in the Arctic, the establishment of territorial defence battalions and other Canada First projects such as the acquisition of C17 aircraft.

Budgetary control for these projects is achieved through the use of an expense ceiling.  The annual expense ceiling is based on accrual expenses rather than cash expenditures. 

Capital projects funded from Budget 2005 and Budget 2006 resources are purchased using “investment cash”. The expenditure of “investment cash” is a cash expenditure but not an accrual expense. As a result, “investment cash” expenditures do not count as expenses against the Department’s in-year budgetary ceiling.  Rather, the charge against the expense ceiling is amortization expense.

In keeping with this two-pronged approach, (modified cash and accrual) to fiscal control and reporting, this Departmental Performance Report will present information on planned and actual spending for fiscal 2006–2007 in two separate tables located in Section III –Table 1a – Comparison of Planned to Actual Spending (Including Full-Time Equivalents) and Table 1b - Comparison of Planned to Actual Spending (Cash Appropriation and Accrual Basis).

Management of budgetary financing (accrual expensing) for specific new capital equipment and infrastructure projects funded in Budget 2005 and Budget 2006 continued to evolve through analysis of lessons learned in the execution of the projects.

Interdepartmental consultations and working groups with staff from the Treasury Board Secretariat and the Department of Finance continued the development of the reporting and governance guidelines associated with budgetary financing.

Effect of Government Efficiency Initiatives on Sustainability

Two significant Government of Canada efficiency initiatives continued to reduce the effective net increase in Defence funding. In particular, the Expenditure Review Committee (ERC) and Procurement Program Reform (PPR) initiatives effectively reduce total allocations beginning in fiscal 2005–2006 and continuing for several years. Implementing these programs has been challenging, and DND is now managing the impact on operational sustainability of existing systems because the funding provided for expansion and new equipment was directed to specific procurements or activities. The net result for fiscal 2006–2007 was a reduction of 23 percent in the planned increase to general sustainability funding.

The following table summarizes the net effect of the Budget 2005 and Budget 2006 sustainability increases, and the application of the ERC and PPR reductions to Defence.

Effect of ERC and PPR on Operational Sustainability Funding From Budget 2005 and Budget 2006 ($ Millions)
	2006–2007
Budget 2005: Operational Sustainability	500
Budget 2006: Operational Sustainability (proposed for fiscal 07–08 and beyond)	148
Less: Defence reductions called for by ERC and PPR	(150)
Net allocation to Sustainability	$498

Source: Vice Chief of the Defence Staff Group

Expenditure Management Review

Defence complied fully with the ERC program, and only $20 million of the total Defence reduction target of $203 million remains to be allocated internally to the appropriate Assistant Deputy Ministers and Environmental Chiefs of Staff. The Assistant Deputy Minister (Information Management) is responsible for the final reduction of $20 million, which was specifically targeted in the IT Infrastructure Support Outsourcing category with phased reductions scheduled to begin in fiscal 2007–2008. All other ERC reductions were included in the forecast allocations, up to and including the steady-state reductions directed to begin in fiscal 2009–2010. The forthcoming assignment of the final $20 million reduction (steady-state value as of fiscal 2009–2010) will be the last of the ERC reductions.

Expansion of the CF

As part of Budget 2006, the Government of Canada announced its intention to increase the size of the Canadian Forces by 13,000 Regular Force personnel and 10,000 Reservists. This would result in an end state of 75,000 Regular Force members and 35,000 Primary Reservists paid strength. 

The initial plan for the first phase was to grow the Regular Force to 70,000 and Reserve Force paid strength to 30,000 over five years. However, following a detailed analysis of the resources required to fund all Defence initiatives announced under Budget 2006, sustain the operational commitments in Afghanistan, prepare for Olympics 2010 and support CF transformation, the expansion was re-profiled to 68,000 Regular Force and 26,000 Primary Reserve paid strength by fiscal 2011–2012, adding one year to the program.

Regular Force

The authorized target of 68,000 is predicated on a personnel attrition rate of about 6.1 percent. As the CF must operate under an establishment ceiling of 68,000 all ranks, any sustained increase in the attrition rate will require increased numbers in the training category, which would result in a lower sustainable manning strength.

Figure 1: 2006–2007 Regular Force Expansion — Annual Strength Report

Notes: Total strength was selected as the best indicator of personnel growth. It includes about 1,100 personnel on leave without pay or in detention. The authorized target of 68,000 is defined in terms of average monthly paid strength.

Data Source: ADM (IM)/DHRIM monthly reports (Note: The timing of data extracts may cause data to vary slightly from CMP/PARRA numbers)

Most new recruits are currently in the training system. Depending on entry program and military occupation, they are expected to be fully employable within the next two to five years.

Although external recruiting targets for fiscal 2006–2007 were exceeded, attrition exceeded projections and CF strength consequently did not increase as expected. In summary, 37 out of 83 targeted occupations achieved growth, six remained neutral, and 40 lost more personnel than they recruited. In order to sustain Joint Task Force Afghanistan, the CF recruited in advance of future years for the army combat arms, especially the Infantry and Armoured occupations, and consequently these two occupations were responsible for a significant proportion of overall net growth. Retention and recruiting efforts achieved encouraging progress with the Medical Officer, Medical Technician, Electrical and Mechanical Engineer, and Combat Engineer occupations, all of which had been identified as “stressed”. Should attrition continue at the elevated levels seen in fiscal 2006–2007, this will further limit the ability of the CF to achieve its in year goals with respect to the average paid strength.

Reserve Force

Figure 2 compares total strength and paid strength in the Reserve Force and shows the growth achieved during fiscal 2006–2007. To meet the requirements of CF expansion, the targets set out in the 2006–2007 Report on Plans and Priorities were revised, and the new Reserve Force interim target is a paid strength of 26,000 by March 31, 2008. Sustainment of Joint Task Force Afghanistan required an increase in the number of Reservists employed on Class C contracts during the reporting period. Most of the growth in Total Strength occurred in the Army Reserve.

Figure 2: Fiscal 2006–2007 Reserve Force Expansion — Annual Strength Report

Notes: The Total Strength figure is calculated from Primary Reserve pay records and includes personnel on Class C status. Paid Strength is an annual monthly average derived from monthly pay statistics that include personnel on Class C status. The paid strength average for fiscal 2005–2006 was derived by adding personnel on Class C status in the CF Regular Force pay system (monthly average) to the number in the 2005–2006 Departmental Performance Report.

Source: ADM (Fin CS) Revised Pay System for the Reserves (RPSR) monthly records as of April 2007.

Figure 3 demonstrates the need to represent Reserve Force strength in terms of a monthly average, as it fluctuates significantly from month to month.

Figure 3: Fiscal 2006–2007 Primary Reserve Paid Strength (by month)

Notes: Data collected on a monthly basis.  Fluctuation in July due to temporary suspension of Reserve training and parading at local units during summer months. Fluctuation in December due to Holiday leave period. The Class C figures were extracted from the April to July 2006 section of the CMP PARRA database and the ADM(IM) DHRIM reports for Aug 2006 to March 2007.

Source: ADM(Fin & CS)/DSFC RPSR report, April 1, 2007

Audit and Parliamentary Committee Evaluations and Recommendations

During the reporting period, three chapters of reports from the Office of the Auditor General that included recommendations directed at DND and the CF were tabled in Parliament. The implementation of responses to the Auditor General recommendations will improve the efficiency and effectiveness with which Defence is able to recruit, retain, train and move CF members. Further details can be found in Section II under Standing Committee on Public Accounts and in Section III - Table 13: Response to Parliamentary Committees, and Audits and Evaluations.

Link to the Government of Canada Outcome Areas

Defence contributes actively to all four key Government of Canada policy areas. The table below shows which National Defence Strategic Outcomes contribute to the various Government of Canada outcome areas. Additional details on Defence contributions can be found in Canada’s Performance and within this report.

Government of Canada Strategic Outcomes	Defence Strategic Outcomes
Legend: ■ = Primary contribution ◘ = Secondary contribution	Canadian’s confidence that DND and the CF have relevant, credible capacity to meet defence and security commitments	Success in assigned missions in contributing to domestic and international peace, security and stability	Good governance, Canadian identity and influence in a global community
Economic affairs
Income security and employment for Canadians	◘
An innovative and knowledge-based economy	◘		■
A clean and healthy environment	◘
Social affairs
Healthy Canadians	◘
Safe and secure communities	■	■	◘
A diverse society that promotes linguistic duality and social inclusion	◘		◘
A vibrant Canadian culture and heritage			■
International affairs
A safe and secure world through international cooperation	◘	■	■
Global poverty reduction through sustainable development		◘
A strong and mutually beneficial North American partnership	■	■	■
A prosperous Canada through global commerce	◘
Government affairs			◘
Source: Vice-Chief of the Defence Staff Group

Corporate Priorities

In fiscal 2006–2007, Defence established priorities to guide its initiatives in response to the government’s agenda. These four priorities were aligned to the program activities and set the tone for the transformation challenges facing the department.

Protect Canadians through the Conduct of Operations

The CF fulfilled their mandate to conduct operations overseas, especially in Afghanistan. Although there was a high level of effort involved in carrying out this major commitment at a consistently high operational tempo, the Land Force maintained the ability to react effectively to any domestic situation that required a military response. Because of the significant increase in the ratio of soldiers to sailors and air personnel in Joint Task Force Afghanistan, the army is less able to maintain a balance of priorities between operations, CF Transformation initiatives, and sustainment activities. However, throughout the reporting period, air force and the navy formations continued to conduct sovereignty patrols and maintain units on stand-by for continental defence.

Defence is fully committed to the integrated “whole of government” approach to deployed operations.  Formal procedures and arrangements exist to coordinate most interdepartmental issues.  Defence also made progress to streamline coordination with its partners in areas such as evacuation of non-combatants and disaster relief.  That noted, some interdepartmental arrangements remain ad hoc.  A staff paper identifying a strategic framework for DND/CF engagement with other government departments is being developed to strengthen co-operation and coordination.

The CF continue their active engagement with Canada’s allies through bilateral and multilateral organizations such as NATO, the UN and NORAD.

Transform and Modernize the CF

Transformation of the CF is proceeding as planned. In the face of high operational tempo, the high departmental priority placed on Transformation has energized commanders and staffs to proceed with fundamental changes to concepts, practices, structure, and in the end, culture. The two main force-employment commands — Canada COM and CEFCOM — are focusing respectively on major operations at home and on missions overseas; employing daily more integrated teams of Regular, Reserve and civilian personnel from all occupations and environments together on the same mission; and reacting more quickly to new threats and natural disasters.

The simultaneous CF actions to maintain a major mission in Afghanistan, assist the DFAIT evacuation operations in Lebanon in the summer of 2006, and support Public Safety Canada’s enhancements to security of maritime approaches to Canada are visible results of transformation.

CANSOFCOM developed the capability to deploy joint formations rapidly, an immediate response capability, and the capability to deploy mission specific task forces as directed by the Chief of the Defence Staff. These forces can act alone or in support of Canada Command, CEFCOM, or allied forces.

During the reporting period, the Canadian Operational Support Command (CANOSCOM) enhanced operational support capabilities of the CF by standing up engineer support groups and Military Police support units for deployed operations.

While work on the integrated force development process is ongoing, there are indications that the process will reduce redundant development, develop greater interoperability of CF components and increase sustainability of deployed forces. The Reserve Force has successfully developed a plan to better fit the efforts and capabilities of its members in the Integrated CF. This new concept of employment and service should begin to prove its worth in the coming year.

Defence Battalion Groups

As part of the overall CF expansion outlined in Budget 2006, four new rapid reaction battalion groups were to be created. An analysis of the feasibility of establishing these groups is ongoing.  Preliminary work has also begun in select locations across Canada to enhance the CF’s ability to support local first responders to domestic crises through the establishment of territorial defence battalion groups. The establishment of these groups was also identified in Budget 2006.

Capability-Based Planning

While measurable progress has been made toward the institutionalization of capability-based planning (CBP), achievement of this goal requires several more years of work. The force employment scenarios for which force structures will be developed have been defined, and DND expects to finish assessing the Future Security Environment and Strategic Operating Concept documents during the next planning period.

Foster Management Excellence in the Defence Institution

Strategic Investment Planning

The work of Chief of Force Development in the production of the strategic direction and outlook for the Department over the long-term, through the use of capability-based planning and scenario development, has enhanced the development of strategic investment planning within the department.  As a result, Chief of Programme has initiated activities that will re-develop the current Defence Plan into a ten-year strategic-level investment plan. This concept was developed to more effectively bridge the short-term requirements and management of defence resources toward the longer-term goals of new capability development, including the divestment or re-investment in current capabilities.  In particular, two of the key development areas for the new investment plan have been the management and allocation of accrual budgeting resources and the focus placed upon the resources needed to sustain capabilities for their entire life cycles.

The development work for the investment plan provided an improved framework for senior-level decision-making.  The programmatic activities associated with developing the plan have allowed senior departmental decision makers to better examine the affordability and achievability of major programme decisions and to better quantify the trade-offs or re-investment required for key initiatives.

Modern Comptrollership 

In June 2004, the Deputy Minister issued a directive on strengthening accountability and comptrollership that gave managers and leaders at all levels clear guidance and direction on management practices and controls, stewardship of resources, probity, and fiduciary responsibilities. Each November since then, the comptrollers of all the Groups and Commands at National Defence Headquarters have given an update on implementation of the directive in their organizations. November 2006 was the final formal update, but informal oversight will continue.

Public Service Modernization Act

At the end of 2005, the final piece of legislation related to the Public Service Modernization Act, the Public Service Employment Act (PSEA), came into force. The PSEA made sweeping changes to civilian recruitment and staffing to facilitate workforce renewal and, although Defence has successfully implemented several of these changes, the real challenge lies in changing the Defence culture sufficiently to achieve full integration. For much of fiscal 2006–2007, Defence efforts to implement the PSEA focused on educating human resources staff at all levels.

Procurement Program Reform

The Procurement Program Reform initiative of Public Works and Government Services Canada reported that Defence could save 12 to 15 percent on non-specialized procurements, making funds available for allocation to other government priorities. The following table summarizes the amounts to be “harvested” from Defence:

PPR Reduction in Defence Funding ($ Millions)
	2005–2006	2006–2007
Reduction in Defence allocations	(19.7)	(62.3)
Note: The program reduction for the out years has yet to be determined.

Source: Vice Chief of the Defence Staff Group

So far, the commodity teams from Procurement Program Reform have been unable to realize the forecast savings. This fact was acknowledged and partially corrected by the in-year reduction of the target assigned to Defence for fiscal 2006–2007 from $86.2 million to $62.3 million.

Contribute to the International Community in Accordance with Canadian Interests and Values

Defence continued to be a key instrument of government policy, responding to Canada’s immediate security needs and shaping an international environment that reflects Canadian values and interests.

During the reporting period, DND and the CF worked closely with their counterparts in the United States to ensure the defence of North America. In the Americas, Canada continued to promote hemispheric security through participation in the Conference of Defence Ministers of the Americas, the Inter-American Defence Board, and the multi-national effort against drug trafficking in the Caribbean region and on the Pacific coast. Overseas, CF members served on operations with the UN, NATO, and different coalitions formed to bring security to places as diverse as Afghanistan, Bosnia-Herzegovina, Sudan and the Middle East.

Relationship Between Corporate Priorities for Defence and Program Activities

The following “crosswalk” table was developed to show the relationship between Defence’s corporate priorities and program activities.  This link ensures that high-level performance measurement and resource information for corporate priorities and related initiatives are reported through the program activities.

	Program Activities
Corporate Priorities 2006-2007	Generate  and Sustain  Integrated Forces	Conduct Operations	Contribute to Canada and the International Community	Type of Priority
Protect Canadians through the Conduct of Operations
Conduct operations at home and abroad; and		■	◘	O
Enhance operational partnerships with other government departments, key security agencies and allies.		■	◘	O
Transform and Modernize the CF
Adopt a fully integrated and unified approach aligning force structure< to ensure operational effectiveness. Key initiatives include the development of Canada COM), six Area Joint Task Forces, CEFCOM,  CANSOFCOM, CANOSCOM,  MILPERSCOM, a Strategic Joint Staff, a Rapid Reaction Force, Mission Specific Task Forces and a managed readiness system to enhance its ability to generate and deploy integrated forces; and	■	◘	◘	N
Adopt an integrated and strategically driven force development framework and process, including expanding the Regular and Reserve forces, ensuring they are well trained and well equipped, and developing a diverse and highly motivated Defence Team.	■			N
Foster Management Excellence in the Defence Institution
Enhance strategic investment planning and accelerate the activities of procurement reform; and	■			N
Ensure successful implementation of modern comptrollership initiatives and the Public Service ModernizationAct.	■		◘	N
Contribute to the International Community in Accordance with Canadian Interests and Values
Expand strategic partnerships with key security departments and other government departments and agencies; and		◘	■	O
Continue to strengthen defence and security arrangements with the United States to enhance domestic and continental security, and with Canada’s allies to enhance international security.		◘	■	O
Legend:     O = Ongoing      N = New      ■ = Primary      ◘ = Secondary

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