Minister of Foreign Affairs appearance before the House of Commons Standing Committee on Government Operations and Estimates (OGGO) on GAC's real property portfolio in other countries and other matters related to the Committee's mandate

GAC's real property portfolio in other countries and other matters related to the Committee's mandate

Tuesday, November 5, 2024

Table of contents

Tab A – Overview material:

• Scenario Note
• Committee’s mandate
• Overview of the Committee
• Biographical Notices of the Members of the Standing Committee on Government Operations and Estimates (OGGO)

Tab B – GAC's real property portfolio in other countries:

• Importance of Real Property Abroad
• Legislative Framework related to Real Property
• Policy Framework related to Real Property
• Real Property Governance at GAC
• Questions and answers

Tab C – Other matters related to the Standing Committee on Government Operations and Estimates’s mandate

• Future of Diplomacy

Meeting scenario

• Minister, you are appearing before the Committee to answer questions on measures, policies and plans related to GAC's real property portfolio in other countries and any other matters related to the Committee's mandate.
• The appearance will last for 1 hour from 11:00AM to 12:00PM.
• The following officials will accompany you during the appearance, and may be called upon to respond to questions: TBD
  • To be determined

Committee’s mandate

Pursuant to Standing Order 108(3)(c), the Committee’s mandate includes primarily the study of:

• the format and content of all estimates documents; and
• the effectiveness, management, and expenditure plans of:
  • central departments and agencies;
  • new information and communication technologies adopted by the government;
  • cross-departmental mandates, including programs delivered by more than one department or agency;
  • Crown corporations and agencies that have not been specifically referred to another standing committee; and
  • statutory programs, tax expenditures, loan guarantees, contingency funds and private foundations deriving the majority of their funding from the Government of Canada.

For your awareness

In a series of OGGO meetings between August 21 and October 3, 2024, officials from GAC faced intense scrutiny over the purchase of a new Official Residence for the Consul General in New York. Key officials, including Consul General Tom Clark, were questioned about the timeline, decision-making process, and financial details surrounding the acquisition. Conservative Party members accused Mr. Clark of dishonesty regarding his involvement, while Liberal members highlighted the consulate's economic and diplomatic benefits for Canada. The committee expressed a strong desire for transparency, requesting additional documents and that the authors of internal emails and you appear before the committee to provide further clarification. The discussions in committee were marked by sharp criticism, personal attacks against the witnesses and allegations of inappropriate political involvement in the process.

Overview of the Committee

Mandate of the Committee

The Standing Committee on Government Operations and Estimates focuses on the estimates process as well as on the effectiveness and proper functioning of government operations.

Under Standing Order 108(3)(c), the Committee’s mandate includes the study of:

• the format and content of all estimates documents; and
• the effectiveness, management, and expenditure plans of:
  • central departments and agencies;
  • new information and communication technologies adopted by the government;
  • cross-departmental mandates, including programs delivered by more than one department or agency;
  • Crown corporations and agencies that have not been specifically referred to another standing committee; and
  • statutory programs, tax expenditures, loan guarantees, contingency funds and private foundations deriving the majority of their funding from the Government of Canada.

Central Departments and Agencies

• Privy Council Office/Prime Minister’s Office
• Public Services and Procurement Canada
• Treasury Board of Canada Secretariat
• Shared Services Canada

Central Departments and Agencies

• Canada School of Public Service
• Federal Public Sector Labour Relations and Employment Board
• Public Servants Disclosure Protection Tribunal Canada
• Public Service Commission

Crown Corporations

• Canada Lands Company Limited
• Public Sector Pension Investment Board
• Canada Post Corporation
• Defence Construction Limited
• National Capital Commission
• Old Port of Montréal Corporation Inc.
• Parc Downsview Park Inc.

Other Organizations

• Canadian Intergovernmental Conference Secretariat
• Transportation Safety Board of Canada
• Office of the Governor General’s Secretary
• Office of the Parliamentary Budget Officer
• Office of the Procurement Ombudsman
• Office of the Public Sector Integrity Commissioner of Canada

Standing Committee on Government Operations and Estimates (OGGO)

Committee Members

Chair: Kelly McCauley, Conservative, Edmonton West, Chair since October 2022, Member since 2016

Vice-chairs:

• Majid Jowhari, Liberal, Richmond Hill, Member since January 2018, Vice-Chair since Dec 2021
• Julie Vignola Critic for Public Services, Tourism, Government Operations & Procurement, Bloc Québécois, Beauport–Limoilou, Member & Vice-Chair since Feb 2020

Members:

• Garnett Genuis Critic for International Development, Conservative, Sherwood Park—Fort Saskatchewan, September 2023
• Kelly Block Critic for Public Services and Procurement, Conservative, Carlton Trail—Eagle Creek, October 2022 Also a member from 2011 to 2020
• Stephanie Kusie Critic for Treasury Board, Conservative, Calgary Midnapore, October 2022
• Rachel Blaney Critic for Seniors, for Veterans, and for Rural Economic Development., New Democratic Party, North Island—Powell River, October 2024
• Parm Bains, Liberal, Steveston–Richmond East, December 2021
• Jenica Atwin Parliamentary Secretary to the Minister of Indigenous Services, Liberal, Fredericton, September 2023
• Irek Kusmierczyk Parliamentary Secretary to the Minister of Employment, Workface Development and Disability Inclusion, Liberal, Windsor–Tecumseh, February 2020
• Charles Sousa Parliamentary Secretary to the Minister of Public Services and Procurement, Liberal, Mississauga-Lakeshore, September 2023

Bio of the Members of the committee

Kelly McCauley, Chair
Edmonton West
Conservative

• Elected as the Member of Parliament in 2015 for Edmonton West, re-elected in 2019 and 2021
• Also serves on the Liaison Committee
• Former Conservative Shadow Minister for Treasury Board
• Previously served on the Standing Committees on Public Accounts, Procedure and House Affairs, and the COVID-19 Pandemic
• Before his election in 2015, Mr. McCauley was a hospitality executive specialized in managing hotels and convention centres
• He has a graduate of BCIT in the Hospitality Management program
• He has a history of advocacy for seniors and veterans
• Pushes for a reform in the PSDPA to protect whistleblowers

Majid Jowhari, 1st Vice-Chair
Richmond Hill
Liberal

• Elected as the Member of Parliament in 2015 for Richmond Hill (Ontario), re-elected in 2019 and 2021
• Also serves on the Subcomittee on Agenda and Procedure of OGGO as well as the Standing Committee on Natural Resources
• Previously served on the Standing Committees on Health, on Industry, Science and Technology, and on the COVID-19 Pandemic
• Born in Iran, he is the first federal MP of Iranian heritage
• He has a degree in industrial engineering from Ryerson University and an MBA from York University’s Schulich School of Business
• Before his election in 2015, Mr. Jowhari was a consultant and engineer

Julie Vignola, 2nd Vice-Chair
Beauport-Limoilou
Bloc Québécois

• Elected as the Member for Parliament in 2019 for Beauport-Limoilou (Québec), re-elected in 2021
• Bloc Québécois Critic for Public Services, Tourism, Government Operations & Procurement
• Also serves on the Subcomittee on Agenda and Procedure of OGGO
• Previously a member of the COVID-19 Pandemic committee
• Before her election in 2019, she was a teacher in a private high school
• Vignola has a bachelor’s degree in history and geography teaching from the Université du Québec à Rimouski
• Interested in issues affecting Quebec, notably producers and the phoenix pay system

Garnett Genuis
Sherwood Park—Fort Saskatchewan
Conservative

• Elected as the Member of Parliament in 2015 for Sherwood Park—Fort Saskatchewan, re-elected in 2019 and 2021
• Shadow Minister for International Development
• Previously served on many committees, including the Standing Committees on Foreign Affairs, on Public Accounts, on Citizenship and Immigration, on Canada-China relations, etc.
• Attended Carleton University where he obtained a bachelor's degree in Public Affairs and Policy Management and a master's degree in public policy from the London School of Economics
• Prior to his election, he was a political correspondent, assistant to prime minister Stephen Harper and adviser to Rona Ambrose

Kelly Block
Carlton Trail—Eagle Creek
Conservative

• Elected as the Member of Parliament in 2008 for Carlton Trail—Eagle Creek, re-elected in 2011, 2015, 2019 and 2021
• Shadow Minister for Public Services and Procurement
• Previously served as Parliamentary Secretary to the Minister of Natural Resources and Member of Panel of Chairs during the 41st Parliament
• Previously sat on many committees, including the Liaison Committee, and the Standing Committees on Public Accounts, on Veteran Affairs, on Health and on Natural Resources
• Prior to her election, Ms. Block served two terms as mayor of Waldheim, Saskatchewan.

Stephanie Kusie
Calgary Midnapore
Conservative

• Elected as the Member of Parliament in 2017 for Calgary Midnapore, re-elected in 2019 and 2021
• Shadow Minister for Treasury Board
• Also a member of the Standing Committee on Official Languages
• Also serves as counsellor on the Canadian Section of ParlAmericas and as a member of the Canadian Group of the Inter-Parliamentary UnionPreviously sat on many committees, including the Standing Committees on Human Resources, on Transport, on Procedure and House Affairs, on the COVID-19 pandemic and on the Status of Women
• Has a B.A in political science from the University of Calgary and an M.B.A. from Rutgers University
• Prior to her election, Ms. Kusie was chargé d'affaires ad interim for Canada to El Salvador, consul for Canada to Dallas, Texas and senior policy advisor to Peter Kent in Latin America.
• Some of her duties before her time in office included negotiating free trade deals, work related to the Keystone Pipeline project, and lobbying the United Nations to place Canada on the Security Council.

Rachel Blaney
North Island—Powell River
New Democratic Party

• Elected as the Member of Parliament in 2019 for North Island—Powell River (British Columbia), re-elected in 2021.
• NDP Whip, and critic for Seniors, for Veterans, and for Rural Economic Development.
• Also, a member of the Standing Committee for Veterans Affairs.
• Previously served on the Special Committee on the COVID-19 Pandemic and the Standing Committee for Indigenous and Northern Affairs.
• Blaney worked with the Homalco First Nation before becoming the executive director of the Immigrant Welcome Centre of North Vancouver Island (later the Multicultural and Immigrant Services Association of North Vancouver Island) in 2007.

Parm Bains
Stevenston–Richmond East
Liberal

• Elected as the Member of Parliament for Stevenston–Richmond East (British Columbia) for the first time in 2021
• Also serves on the Standing Committee on Access to Information, Privacy and Ethics
• Prior to his election, Mr. Bains was an instructor at Kwantlen Polytechnic University. He also worked as a media and public relations officer with the British Columbia provincial government
• He has attended the British Columbia Institute of Technology as well as the Royal Roads University, where he got a Master's degree

Jenica Atwin
Fredericton, NB
Liberal
Parliamentary Secretary to the Minister of Indigenous Services

• Elected as the Member of Parliament for the riding of Fredericton in 2019 representing the Green Party and re-elected in 2021 representing the Liberal Party
• Parliamentary Secretary to the Minister of Indigenous Services
• Also serves on the Standing joint Committee on the Library of Parliament
• Previously served on several standing committees, including the Standing Committees on Indigenous and Northern Affairs, on Health, for the Scrutiny on Regulations, and on the COVID-19 committee, as well as the Liaison committee
• She completed a Master's in Education at the University of New Brunswick
• Has personal ties to the Indigenous community

Irek Kusmierczyk
Windsor–Tecumseh
Liberal
Parliamentary Secretary to the Minister of Employment, Workforce Development and Official Languages

• Elected as the Member of Parliament for Windsor—Tecumseh (Ontario) in 2019, re-elected in 2021
• Parliamentary Secretary to the Minister of Employment, Workforce Development, and Official Languages
• Previously served on the COVID-19 Pandemic committee
• Born in Poland, he immigrated to Canada in 1983 after his father was imprisoned for being a member of a movement opposed to communism.
• Before his election, was a city councillor for the Windsor City Council
• PhD in Political Science from Vanderbilt University, an MSc in government from the London School of Economics and a bachelor in Journalism from Carleton University

Charles Sousa
Mississauga-Lakeshore, ON
Liberal
Parliamentary Secretary to the Minister of Public Services and Procurement

• Elected as the Member of Parliament for Mississauga-Lakeshore (Ontario) for the first time in 2022
• Parliamentary Secretary to the Minister of Public Services and Procurement
• Previously served on the Standing Committees on National Defence, as well as on Science and Research
• Before his election he joined the provincial cabinet as the minister of labour in 2010 and became Ontario's minister of citizenship and immigration in 2011. Also was the Minister of Finance for Ontario from 2013 to 2018
• Graduated from Wilfrid Laurier University in 1982 with a degree in Business Administration in September 2023
• Has a history of finance and banking

Importance of Real Property Abroad

• GAC’s global property network supports the secure delivery of diplomatic and consular services, while safeguarding personnel and national interests.
• GAC’s properties facilitate international diplomacy and provide crucial support for Canadians abroad during crises.
• GAC’s real estate portfolio upholds Canada’s diplomatic goals, advancing foreign policy and symbolizing our commitment to human rights and global cooperation.

Overview of real property portfolio abroad

GAC is the designated custodian of 2,600 Crown-owned and leased assets worldwide valued to $3B, supporting over 7,800 employees globally in 112 countries. GAC is responsible for the service and maintenance of 182 Chanceries, 87 Official Residences and 2,300 Staff Quarters with hundreds of major and minor real property projects underway.

Benefits to Canadians

GAC oversees a critical real property portfolio that provides the necessary infrastructure for GAC employees to effectively deliver programs and services abroad, protecting Canadian personnel, sensitive information, and vital assets essential to national interests.

In addition to diplomacy, GAC’s properties are used to advance Canadian economic interests and trade facilitation as well as ensuring the safety and security of Canadian citizens abroad, particularly during emergency and crisis situations. Diplomatic missions serve as safe havens, delivering consular services to Canadians in distress and supporting critical operations such as evacuations.

Whether owned or leased, these properties must align with Canada’s diplomatic goals, embodying the nation’s commitment to human rights, the rule of law, and global cooperation. GAC’s real estate portfolio is vital to advancing Canada’s foreign policy objectives and maintaining the country’s global presence.

Significance of CNGNY and mission network in the US 

The Consulate General in New York is one of Global Affairs’ most important missions. Not only does it offer essential services to the approximately 300,000 Canadians who reside in the region, and many thousands who visit every year, but it also plays a key role in safeguarding and promoting Canada's trade and investment interests. The Consulate supports Canada’s operations in a city that is the financial capital of our most important trading partner, and indeed, the world. It covers a large territory of five states that together account for over $132 billion in two-way goods trade each year. Since April 2022, the trade and investment team have delivered 1606 commercial services to Canadian businesses, held 1279 meetings with local partners and contacts, and made 65 foreign direct investment referrals to communities in Canada.

The official residence in New York City is an essential element of Canada’s diplomatic toolkit. Events hosted at the official residence provide Canada an opportunity to connect Canadians to key stakeholders in the United States, and to pursue opportunities that benefit Canadians. In the past two years, outcomes from events hosted at the official residence have resulted in over $1 billion in investments and significantly increased other business development opportunities for Canadian companies, while building important relationships with key political and economic stakeholders.

The Consulate General in New York is part of Canada’s overall diplomatic presence in the United States. Canada’s network includes the Embassy in Washington, D.C., 12 Consulates General, 3 trade offices, and 14 Honorary Consuls which all support and bolster the Canada-U.S. relationship. The network supports Canadians in need of assistance abroad, advances Canada’s foreign policy priorities, and supports Canada’s largest trading relationship, a relationship that sees over $3.6 billion worth of goods and services crossing the border each day. Canada’s diplomatic network builds relationships with U.S. interlocutors and advocates in support of key Canadian interests in the United States, including on trade policy, energy, and border issues. This engagement is critical to advancing Canada-U.S. mutual security and prosperity. Additionally, the network houses employees of various provinces and federal departments, such as National Defence and the Canadian Armed Forces, Immigration Refugees and Citizenship Canada, Department of Finance, and Public Safety. Having these employees located within Canada’s missions ensures that they can reach U.S. government contacts directly and efficiently to work on issues of importance to Canada and the United States.

Legislative Framework related to Real Property

• The Department of Foreign Affairs, Trade and Development Act (DFATD Act) provides the powers, duties, and functions of the Minister of Foreign Affairs which includes ensuring the management of Canada’s diplomatic and consular missions.
• Key authorities for real property management are defined in the Financial Administration Act, and the Federal Real Property and Federal Immovables Act, ensuring compliance and governance in federal transactions.
• Global Affairs Canada has been granted authority by Treasury Board to approve real property transactions valued up to $10 million.

Key Legislative Frameworks

There are three legislative frameworks which grant authority over real property management and financial oversight, including:

1. The Financial Administration Act 7(1) delegates authority to the Treasury Board (TB) to establish administrative policy regarding real property management and financial oversight.
2. The Federal Real Property and Federal Immovables Act which outlines the Ministerial authority over federal real property transactions. The Federal Real Property and Federal Immovables Act (FRPFIA) provides the legal framework for federal government real estate transactions. Section 3 of FRPFIA allows the Minister of Foreign Affaires to authorize in writing certain departmental public servants and Heads of Missions to exercise on her behalf the powers conferred on her under this Act. The Treasury Board establishes by decision the maximum thresholds for each type of transaction. Treasury Board approval was received in 2019 and 2022 to increase the delegated amounts and are reflected in Table 4 for real property transactions limits and conditions of the Delegation Instrument.
3. The Department of Foreign Affairs, Trade and Development Act states that the Minister of Foreign Affairs is responsible for matters related to the external affairs of Canada, including trade and commerce and international development Additionally, under s.10(2)(h): the Act assigns the Minister responsibility for the management of Canada’s diplomatic and consular missions, and s.10(3) enables the Minister to develop and carry out programs to promote Canada’s interests abroad, including:
   1. Fostering the expansion of Canada’s international trade and commerce.
   2. Supporting sustainable international development, poverty reduction in developing countries, and providing humanitarian assistance during crises.

Transaction approval limits and conditions

Under the Federal Real Property and Federal Immovables Regulations, a Minister is authorized to conduct real property transactions if the market value does not exceed designated limits. Treasury Board has approved a Special Acquisition Limit, allowing GAC to purchase official residences valued up to $10 million.

Delegation of Financial Authority

Within GAC, financial authority for real property transactions is governed by the Delegation of Financial and Contractual Signing Authorities Instrument.

This instrument outlines a $10 million acquisition limit and can delegate decision-making authority to the Senior Assistant Deputy Minister and Associate Deputy Minister of the International Platform Branch (ACM).

Policy Framework Related to Real Property

• The Treasury Board Policy on the Planning and Management of Investments outlines the responsibilities of deputy heads in managing varying areas, highlighting accountability and the need for robust processes and controls while the Treasury Board Directive on the Management of Real Property provides detailed guidance for departments managing real property.
• GAC’s Real Property Management Framework (RPMF), updated in 2024, details GAC’s approach to managing real property, including governance, oversight, and performance assessment mechanisms.
• The purchase of the new Official Residence in NY complied with all policy requirements.

Treasury Board Policy on the Planning and Management of Investments

This policy outlines deputy head responsibilities in the areas of project and programme management, procurement, real property, and materiel management, including designating a senior official(s) responsible for supporting the deputy head’s accountability. GAC has two senior designated officials for real property:

• The Associate Assistant Deputy Minister for international real property
• The Chief Financial Officer for domestic real property

The focus of the policy is high-level, and speaks to ensuring that appropriate processes, systems, and controls are in place to manage investments, and that decisions taken are well considered and documented to ensure best value to the Crown and Canadians.

Treasury Board Directive on the Management of Real Property 

This directive is subordinate to the Policy on the Planning and Management of Investments, and focuses on the area of real property and is applicable to custodians of real property (GAC is the mandatory custodian of diplomatic real property outside of Canada as per the Department of Foreign Affairs, Trade and Development Act. It is more detailed and gives direction to the real property senior designated officials named by deputy heads in response to the policy direction, as well as to real property practitioners.

GAC’s Real Property Management Framework 

Having an RPMF is a policy requirement found in the TB Directive on the Management of Real Property. The RPMF describes the various elements a custodian department has in place to effectively manage its real property and must include processes, systems and controls that include oversight, planning and reporting mechanisms, and incorporate performance results and lessons learned to inform real property decision-making. GAC’s RPMF, updated in 2024, describes GAC’s real property policy and legal context, our governance systems, and how we manage our programs and internal policies, as well as our assets/portfolio, accommodation, investments and projects, and our data and information.

Real Property Governance at GAC

• Under the authority of the Senior Designated Official (SDO), international real property governance processes ensure a structured review and approval of investment proposals and effective life-cycle management for both transactional and project solutions.
• The SDO exercises their accountability through the advice and support from a team of subject-matter experts (SMEs), led by the DG of Policy and Planning for the acquisition of international properties, with decisions informed by SMEs.
• The SDO for international real property ensures governance processes are proportional to project complexity and risk, complying with appropriate oversight, stakeholder interests and transparency.

Description of the process 

GAC’s real property (RP) governance involves a structured decision-making process led by the SDO (Associate ADM of Real Property and Infrastructure Solutions) to review and approve international RP investment proposals while monitoring their execution through life-cycle management. The process encompasses both transactional solutions—such as purchasing, disposing, or leasing properties—and project solutions that involve constructing or modifying existing properties.

To advance a project, it must be presented to relevant governance bodies for review and approval. The governance structure (Annex A) includes three key decision-making bodies where approvals are sought and where approval is granted by either a Director or Director General in the Policy and Planning Bureau, or by the SDO, depending on the financial scope of the transaction. This framework ensures compliance with relevant legislation and policies, facilitating effective oversight of all RP initiatives.

Delegation of Financial and Contractual Signing Authorities

For the acquisition of an international property, the Associate ADM of Real Property and Infrastructure Solutions has delegated decision-making authority to the Director General of Policy and Planning. Both transactional and project decisions are consulted on and informed with the input of SMEs, including legal counsel, greening and environmental experts, security, health and safety teams, as well as Mission staff.

The Delegation of Financial and Contractual Signing Authorities Instrument defines the authorities delegated by the Minister of Foreign Affairs to specific departmental positions. The Table 4 – Real Property Transactions Limits and Conditions of the Delegation Instrument defines specific authorities on real property transactions delegated by the Minister of Foreign Affairs to public servant positions within GAC. Currently, the following positions have Real property authorities: USS, HOM, DHOM, ADM ACM, AADM ACM, DG ARD, Director ARA.

For real property transactions outside Canada, incumbents of headquarters positions shall not provide the HOM and DHOM approval of a proposed transaction without confirmation that funds are available and have been committed. HOM and DHOM have authority in their respective countries of diplomatic appointment only or in the headquarters city of the international organization to which they are appointed. Transactional authority with respect to any acquisition or disposal shall not be exercised by Head of Mission or Deputy Head of Mission without the written pre-approval of the headquarters positions that have the authorities with the exception of the following:

• The acquisition of a staff quarter by lease or licence where the annual consideration does not exceed $300K and the total consideration does not exceed $3M; and
• The disposal of a staff quarter by lease or licence where the annual consideration does not exceed $150K and the total consideration does not exceed $1.5M.

The legal document must be signed by the HOM/DHOM even if the authority is provided by a HQ position as only positions officially appointed at a mission can sign on legal documents related to real property transactions in a foreign country.

Transaction approval limits and conditions for the acquisition or disposition of Real Property

[REDACTED]

Roles and responsibilities 

The SDO oversees the governance of all projects, ensuring that it is:

• Proportional to the project’s materiality, complexity, risk, and scope.
• Effective in decision-making, communication, control, and oversight.
• Supported by appropriate structures and processes, including committees, quality assurance, and independent reviews.

Additionally, the SDO also ascertains that:

• Key stakeholder interests are considered in governance discussions.
• Input from functional experts is solicited as needed.
• Project decisions are documented and communicated to stakeholders.
• The SDO is supported by subject matter experts, including Portfolio Managers, Realty Managers, Project Sponsors, and Project Managers.

Questions and answers

Procurement Audit

Why did the recent GAC audit on procurement practices show that ¼ of GAC contracts broke the rules?

On May 15, 2024, GAC officials appeared at OGGO to discuss an internal audit on the procurement of consulting services. GAC proactively undertook an audit of procurement services which was identified in GAC’s 2023-25 Risk Based Audit Plan. The objective of the audit was to determine whether the procurement of consulting services at GAC comply with applicable authorities and is conducted in a manner to maintain the integrity of the process. GAC has acknowledged the recommendations and has implemented various tools and processes to improve internal practices.

The audit yielded two recommendations – one for additional training on information management and one relating to the updating and simplification of procurement guidance documents. On the former, this recommendation has been completed ahead of schedule, and training has begun. On the latter, procurement guidance documents are currently being reviewed and updated to assist departmental personnel in the fulfillment of their procurement related duties. This recommendation is on track to be completed by December 2024.

Taxes

In general, how much does GAC pay in property tax and other sales taxes, and does GAC receive an exemption from this tax or others related to its Official Residences in New York?

Capital gains taxes are for entities which are obligated to pay taxes to the Internal Revenue Services. Canada is exempted from paying them by virtue of the Vienna Convention on Consular relations. The Government of Canada is also exempt from paying State and City taxes based on the exemption provided under New York Real Property Tax Law, which exempts properties owned by foreign governments used in their official capacities. This was not the case with the former residence given the co-op model. GAC was also exempt from paying the Additional Tax on Transfers of Residential Real Property.

*In the former Co-op model, GAC is unable to be exempted from paying taxes as allowed by the Vienna Convention on Consular Relations. Condo fees and real property taxes are included as indicated in the table above. In the new official residence, GAC is exempted from paying real property taxes estimated to be $115,008 CAD (payable twice a year, i.e. $57,504).

**GAC was exempt from the payment of the Additional Tax on Transfers of Residential Real Property however, pursuant to the terms of the Purchase Agreement on the new official residence, the Purchaser was obligated to pay the City and State Transfer Taxes on behalf of the Seller. Both Transfer Taxes represented a total of $137,401.47 USD. (NY City Transfer tax $94,546.97 and State tax of $42,854.50).

Public perception / Location

How do Canadians perceive spending $9M on a luxury condo during fiscal challenges?

The replacement of the Official Residence provides long-term value, saving $7.4M in net present value and will yield $115,000 in annual savings. The transaction also supports Canada’s diplomatic objectives in a competitive market.

What is a Net Present Value?

NPV is a financial concept that helps you figure out whether an investment is a good idea or not. In this transaction's context, it considers the one-time cost, cost avoidance, ongoing savings, and market appreciation.

Why was the decision made to replace the official residence?

The former residence was deteriorating, not meeting accessibility standards, and costly to renovate. Replacing it was more cost-effective, with renovation estimates at $2.6 million compared to the new property’s total benefits and savings.

Why purchase a condo in an expensive area like Billionaires Row?

Further to reviewing 21 properties, the selected unit is located in Midtown, on a lower floor and not in the skyscraper section of the building as reported in the media and offers value for money. Midtown’s central location, accessibility, and security make it ideal for diplomatic functions. The property was selected based on price comparisons and its suitability for our needs.

Future of diplomacy

• Global Affairs Canada (GAC) is implementing a multi-year organizational transformation to ensure that it is well equipped to serve Canadians in meeting the global challenges of today and the future.
• The Transformation Implementation Plan is organized along 5 pillars: Organizational culture, People, Global Presence, Policy, and Processes and Tools.
• In the first year of implementation, GAC has made important progress, including modernizing and simplifying the department’s structure and governance and growing our foreign service. We have also put in place key tools to review Canada’s global footprint and have had a detailed look at our approaches to responding to international crises.

Supplementary messages 

• We’ve launched a new organizational structure and governance model responding to key drivers of our transformation efforts, focusing on a more people-centred, agile, efficient, and effective organization.
• We’re strengthening our organizational culture: we have launched our first Accessibility Action Plan, published our second annual report on addressing misconduct and wrongdoing, and we’re seeing the values outlined in our North Star statement set in across the organization.
• We are reviewing our global footprint to assess whether Canada has the right level of representation abroad to continue to increase its global influence, defend its national interests and provide quality services to Canadians.
• Recommendations will include innovative ways to maximize our presence abroad and will lay the groundwork for a framework to ensure that data-driven analysis of the mission network is done regularly.

Update

• We’ve also made progress on reducing red tape and modernizing our processes, expanding and filling our pools of foreign service officers, and reviewing our crisis management approaches.
• Over the next six months, the department will work to: advance our open policy function, strengthen knowledge networks across the organization; break down silos, enhance integration and collaboration, and empower Heads of Missions; improve GAC’s agility and surge capacities in responding to crises and emerging priorities; finalize the global footprint review; and implement the recommendations identified in the crisis management review.

Background

[REDACTED]

These resources will allow the department to continue to invest in recruitment and training for the foreign service and human resource transformation, modernize benefits for Locally Engaged Staff, ensure the integrity of GAC’s IM/IT systems, and stabilize presence at Canada’s Permanent Mission to the UN in New York. Alongside this investment, GAC will continue to reallocate from within existing resources to ensure maximum ambition.