Ensuring the Future of our Association

June 13, 2005

This document provides information on the financial situation of the Association and outlines the choices and strategies for ensuring its future and sustainability. It highlights some of the Association’s initiatives and the leadership role played by both the National Executive Committee (NEC) and the Local Leadership in support of an appropriate level of dues required to continue providing services to you.

It provides information that will help you initiate discussions at Local meetings to address the dues increase issue. (See Annexes A, B, and C for further information).

Why We Need A Dues Increase

The Association needs a dues increase to continue to provide the important services demanded by our members. In order to meet this objective, we must do three things:

I. eliminate the current operating deficit as quickly as possible,

ii. meet the annual operating expenses, and

iii. build reasonable contingency reserve funds or Members Equity in the planning horizon.

In addition to the above, here are further considerations for a dues increase:

First, CAPE needs to increase its staffing capacity to cope with services being demanded by members. Unfortunately, it is proving increasingly difficult for CAPE to maintain the current level of service because of the volume and increasing complexity of members’ demands.

We are already feeling pressures in terms of more demands for service due to the implementation of the Public Service Modernization Act (PSMA), the most far-reaching renewal of human-resources management introduced by the Government of Canada in nearly 40 years. To that end, the government has introduced a new piece of legislation effective April 1, 2005, the Public Service Labour Relations Act (PSLRA). Changes to the Financial Administration Act are also effective as of April 1. Changes to the Public Service Employment Act will be effective in December 2005.

The PSLRA, as you know, has ushered in the establishment of various labour-management consultation processes in departments and agencies so as to try to resolve problems before they escalate to grievances. These early intervention mechanisms require bringing together employer and union representatives. For CAPE, this means the involvement of our LROs and Local Leaders, thus effectively stretching our current capacity to its limit.

Second, CAPE needs to integrate into its daily operation, an individual/resource for policy development and lobbying efforts in order to be more pro-active in the new labour relations environment. Currently, for lack of resources, CAPE’s ability to act rather than only react to major changes is very limited.

Third, at various general meetings, our members have clearly told us to provide a greater volume of information and various new types of electronic communications. To meet these demands, CAPE communications functions would require more resources. If web conferencing and other IT innovations are added to the mix, it would be prudent and more cost effective to look at an in-house informatics specialist whose responsibilities will include managing the office’s informatics system plus working on other related communications functions.

Fourth, more communications with members means more translation. As you know, one of the founding principles enshrined in our Constitution is that “We shall ensure that our Association is a fully bilingual organization, ….” The cost of contracting out translation is increasing with increasing communications with members. Again, it would be prudent and more cost effective to look at having an in-house part-time translator to provide translation services.

For a full discussion of this and details of other organizational needs and costs, see Annex D - Rationale and Needs Analysis for Additional CAPE Staff.

Taking Leadership

Given the importance of sustaining our Association in the future, the National Executive Committee and the Local Leadership have come out strongly in support of CAPE and a dues increase. The NEC, prior to meeting with the Local Leadership (LL) in February reviewed a number of dues increase scenarios and presented them to the LL. Following a full discussion, exchange of views and divergent opinions expressed on the level of dues increase, the NEC established a Task Force to review and recommend an appropriate level of dues increase.

The second Lowest Dues

There are various ways of establishing the level of dues to be paid by members. Currently, all CAPE members pay the same level of dues, which is a fixed amount of $23 a month. An alternative to the fixed amount approach is the collection of a fixed percentage of real salary from each member. This approach was reviewed and considered to be inappropriate for our members.

Though the dues increase your National Executive Committee will be proposing may seem large in relation to the current level of $23 a month, our dues, which is currently the lowest, will remain the second lowest among the federal public service Bargaining Agents. The Association of Canadian Financial Officers has the lowest dues at $25/month.

Services we provide

In order to address the deficit situation, it is important to reflect on the kind of services the Association provides and how they may affect your career. For example, CAPE:

• provides individual members with first class service, second to none, on matters affecting employer-employee relations. Since the creation of CAPE, our LROs have handled, in total, 502 grievances, and 117 appeals. Moreover, while the number of grievances has gone up, the changing nature of grievances filed by CAPE members has also increased the work load. Over the past few years, the grievance work load has shifted from the more technical collective agreement type grievance to the more complex types such as harassment and abuse of authority. The result of the shift has been to increase the amount of resources required to deal with the average grievance.

• negotiates Collective Agreements for all members of its bargaining units. CAPE negotiates for the EC bargaining unit, the LoP, and the TRs including their Financial Incentive Plan. The Association represents a union of respected professionals in the Federal Public Service;

• takes various court actions in order to fight on behalf of the membership the government’s appropriation of the pension surplus generated by the membership’s contributions to the plan;

• advises and represents members on matters of individual rights and human rights. For example, intervening at all levels of court up to the Supreme Court of Canada on the Vaid Human Rights Case against the House of Commons;

• represents collective interests of CAPE members on labour-management consultation committees and working groups. For example, CAPE co-developed the National Labour Management Consultative Committee at Industry Canada to ensure we are aware of departmental changes and decisions that could adversely affect our members. CAPE was also instrumental in establishing a new consultation protocol with the Bureau of Translation. It was also very active in presenting concerns regarding production objectives established by the Bureau the result of which has been a change to a new system;

• prepares and delivers training to Stewards, and works with local officers. Twice a year, LROs provide Local Leaders and Stewards training on issues such as:

 basic Steward training (grievance and appeal process)

 know your collective agreement

 occupational health and safety

 negotiations, and

 accommodation

In addition, each year, LROs help Locals organize their Annual General Meetings.

• reviews government policies and directives, and prepares position papers.

• works with other unions in order to establish where possible a common front on department and service wide issues;

• initiates actions before the Public Service Staff Relations Board on behalf of the membership. For example, many members benefited from the Association’s case against the Treasury Board’s interpretation application of the LaJoie decision that discriminated against our members. [The Lajoie Decision stems from a joint Social Science Employee’s Association (SSEA) - Canadian Union of Professional and Technical Employees (CUPTE) discrimination complaint filed against Treasury Board for using a method of calculating back pay based upon the Lajoie decision of the federal court for all members instead of using the calculation that was most beneficial to the employee]. CAPE has also filed a complaint before the Canadian Human Rights Commission on a matter relating to the TR pay equity settlement;

• prepares and presents briefs to Parliamentary committees considering legislation directly relevant to CAPE members. For example, briefs were presented on the matters of C-78 (Pension surplus appropriation), C-25 (Public Service Modernization Act) and another Bill C-241 (Public Service Whistleblowing Act);

• carries out research on issues of importance to the membership. For example, CAPE monitored and prepared information on the effects of translation production targets on the duty to accommodate. It also prepared a study of responses to the Public Service Employees Survey, and a study of the issue of unpaid overtime.

ANNEX A

Background

• During the 1990s and as recently as 2001, conditions made it possible for both CUPTE and SSEA (the founding bargaining agents of CAPE) to function with relatively low operating costs. These conditions included the suspension of collective bargaining for several years, the reluctance of public service employees to use redress procedures during the Program Review period, and the lower incidence of legal action by public service unions.

• As well, both SSEA and CUPTE were able to keep costs down by taking advantage of a depressed rental market for office space in the latter part of the 1990s.

• These conditions no longer hold, nor will they likely return. By 2003 year end, SSEA (NOT CAPE) incurred its first audited operating deficit of about $56,780. By 2003-2004 fiscal year end, CAPE incurred its first audited deficit of about $1.09 M.

• At the beginning of CAPE’s 2004-2005 fiscal year (Aug.1) the Association had reserves of approximately $3.0 M. CAPE’s deficit now is approximately $560,000.

• The Association will sustain two successive budgetary deficits of approximately $1.04 M and $1.13 M, covering a two year period ending on July 31, 2006, if the dues remain unchanged at $23. In effect, the deficit alone will thus consume two-thirds of CAPE’s reserve. By the fiscal year ending on July 31, 2007, the Association’s Members Equity will be a negative figure of approximately $270,000.

• The current operating deficits are the result of many factors including; hiring additional staff to meet an increasing demand for services; the increasing costs of collective bargaining; rising professional fees for legal services owing to action to protect your pension surplus, human rights cases, pay equity and other legal challenges; the skyrocketing costs of accommodations in the national capital region; and the inadequacy of a $23-a-month dues base to sustain a public service union in 2005.1

Annex B: The Financial Situation in Perspective, provides full detailed information (facts and figures) on the causes of the deficits.

• The combined equity of CUPTE and SSEA was used, to a large extent, in the construction and furnishing of the new CAPE offices, and in the purchasing of equipment, computers, etc.

• The incurrence of an operating deficit is a serious concern for the National Executive Committee. Accordingly, it has raised and discussed the issue at various CAPE forums in the past year. See Annex C: Chronology of Dues Increase Discussions.

ANNEX B

The Financial Situation in Perspective

In previous communications on the Association’s financial position, the NEC has provided you with information on how the current operating deficit occurred.

1. Deficit Before CAPE - Contributing Factors

By 2003 year end, SSEA incurred its first audited operating deficit of about $56,780.

The major contributing factors to this were the following:

a. Hiring Additional Staff

An additional staff was hired prior to the merger. This increased salaries by $110,000. Part of this was due to incremental movements in salaries

b. Computer Expenses

Approximately $60,000 was spent on computers, maintenance, website, etc.

c. NEC Meetings

A number of special meetings leading to the merger increased the expenses by $15,000 over the previous years.

d. Printing and Postage

Primarily because of the Special General Meetings, this increased the expenses considerably by $70,000.

e. Stewards Training

The cost of training increased by approximately $32,000.

f. Travel

Travel by LROs to service our members in the regions, members coming to the National Capital Region, plus cost of participation in NJC increased expenses by about $ 27,000.

g. Decrease in Other Income

Due primarily to interest rate fluctuations, income was decreased by about $30,000.

2. Current CAPE Deficit - Contributing Factors

The significant causes of this deficit includes the following line items in no particular order:

a. Interest Income

Investments were cashed out to meet needs of our obligations, e.g., to pay the contractor for the construction of the new offices. In total, we cashed out over $400,000 and this effectively reduced the interest income earned on our investments. In addition, the economy experienced lower than normal returns on investments. Decrease in interest income was approximately $40,000.

b. Computer Expenses

There was additional cost related to the set up of the computers in the new offices, e.g., wiring, including additional licensing and database programming. Further, additional computers were leased to ensure all staff was connected. All this cost about $77,000.

c. Collective Bargaining and Meetings

There was a huge increase in the expenses for two of the Bargaining Units, the EC group and the TRs. The TRs had two separate Bargaining Committees, one for the regular Collective Bargaining negotiations and the other, the Financial Incentive Plan negotiations. This amounted to about $62,000.

d. Professional Fees

This went up by approximately $100,000. We paid $25,000 as a retainer for the challenge to Bill C-78, Pensions Surplus Case, legal action taken in concert with other bargaining agents, the RCMP, including a Military Retirees/Superannuates’ Association to protect your pension surplus. Legal expenses also went up for the Vaid intervention (related to Human Rights on Parliament Hill), and the TR Pay Equity issues.

e. Rent

With the merger CAPE needed an increase in office space. Neither the SSEA nor CUPTE’s premises could accommodate the merged staff. An extensive review was done to insure CAPE had sufficient space for the current staff including projected growth of the Association and sufficient storage space.

In addition, CAPE needed to be centrally located for easy access to a majority of our members and to bus routes. Accordingly, CAPE established a Sub-Committee to work with Royal LePage Real Estate Agent and Staff Union to make recommendations, based on the above requirements, for a reasonable accommodation. Given the skyrocketing costs of accommodations in the NCR at that time, CAPE made the decision to lease the current premises as the best option. By locking into a long term lease a one year free rent was included in the lease.

Currently, CAPE occupies 15,607 square feet. The minimum rent to December 31, 2006 is $22 per square foot, plus $19.13 for operating costs and taxes. For the period of January 1, 2007 to September 30, 2013, the minimum rent will be $24 per square foot including $19.13 in operating costs. According to the Ottawa Business Journal, August 2003, this was a very good deal and that CAPE, in fact, is paying less than the market rate for a Class A space in the core of downtown Ottawa.

f. Salaries

CAPE’s staff complement is currently 20. The salaries and benefits for staff increased by $290,000. This includes a transitional expense for a full time TR - VP for a partial year.

g. Staff Development

To raise the proficiency level of our staff in both official languages and to better serve our membership the expense for language training increased by about $42,000.

Annex C

Chronology of Dues Increase Discussions

• The matter of resources, types of services and the financial viability of the Association were raised and discussed at various times in various CAPE forums in 2004. Both the National Executive Committee (NEC) and the Finance Committee discussed the matter.

• In order to keep separate the budget exercise of 2004-2005 and any long-term decision by the membership regarding the appropriate level of dues for the Association, it was decided by the NEC to ask the Finance Committee to complete the budget exercise first.

• The NEC decided also to ask the Finance Committee to prepare information for the new NEC that was to be elected in December 2004. The purpose of the information was to allow an informed membership discussion of the matter of dues.

• On October 26, 2004 the Finance Committee discussed various scenarios for dues increases. The scenarios included various assumptions regarding increased costs.

• On December 9, 2004 the Finance Committee reviewed a new set of scenarios where no additional costs were included, including any inflationary adjustment.

• On January 18, 2005, the new Finance Committee struck after the December elections met and discussed the dues scenarios. It was decided not to recommend a particular scenario to the NEC, but only to express a preference. Five scenarios were selected for information purposes. The committee asked that several documents be prepared for the NEC in order to allow an informed discussion.

• On February 2, a special meeting of the National Executive Committee was convened. The NEC met and discussed the dues at the special meeting and decided to ask the Directors and Stewards of locals for advice on several matters related to the dues increase.

• A motion was passed according to which the Executive committed to resolving the financial problems of the organization in a way that would allow the organization to continue to operate. It was decided to prepare information for a meeting of the local leadership on the matter of a dues increase.

• On February 21, 2005, the National Executive Committee met with the Local Leadership, presented them with a number of dues increase scenarios and sought their support for dues increase so as to sustain CAPE.

• On February 24, 2005, the National Executive Committee established a Task Force to review and recommend an appropriate level of dues increase necessary to:

 eliminate the deficit as quickly as possible,

 meet the annual operating expenses,

 build sufficient contingency reserve funds to cover the annual operating budget,
 a draft communication package.

The Task Force submitted its Report with recommendations to the National Executive Committee on March 31, 2005

Annex D

Rationale and Needs Analysis for Additional Staff

Administrative Clerks

CAPE has five Administrative Clerks. One has been allocated part-time to support the Finance Officer (FO) in response to more financial information. A full time Administrative Clerk is needed to focus and concentrate on Finance work so as to fill in for the FO in her absence.

In addition, the work done by the Finance Administrative Clerk will free up time for the finance officer to devote to preparing various reports that will allow the Finance Committee to carry through on its commitment of regular strategic reviews of expenditures.

CAPE will need to hire an Administrative Clerk to replace the person who would be moved to the finance clerk position. A second Administrative Clerk will then be needed.

Labour Relations Officer (LRO)

It is anticipated that the pressures that we are already feeling in terms of more services due to PSMA will increase in the next few months.

Trying to solve problems before they become grievances is becoming the norm rather than the exception with various processes being set up in departments. These early intervention mechanisms (which CAPE needs to tailor to its resources) require more LROs. The demands will even become greater with the introduction and practice of the Informal Conflict Management System.

It should be noted that we have asked LROs to carry out various tasks that they did not carry out previously, e.g., work on public service wide committees such as NJC committees and Public Service Commission Advisory Committees (PSCAC) working groups, conceive and deliver various training sessions, provide policy advice to the Director, etc. Thus, the work load has grown simply in terms of the new types of work, not to mention the increase in representational work, and consultation with the employer at department and service wide Labour Management Consultation Committees.

Temporary Classification Officer

Classification Reform resulting from Public Service Modernization will eventually add to the work load of our labour relations functions. One aspect of the Modernization is that by Fall of 2006, the EC group should have a new classification standard. CAPE should be prepared to deal with hundreds of classification grievances expected from our members. This position is temporary and is planned for a two year period during which classification grievances will be processed.

IT Officer

At various general meetings, our members have clearly told us to provide a greater volume of information and various new types of electronic communications. To meet these demands, CAPE communication functions would require more resources. If web conferencing and other IT innovations are added to the mix, it would be prudent and more cost effective to look at an in house informatics specialist.

This individual’s responsibility will include managing the office’s informatics system plus working on other related communications functions. As a result, the Manager of Administration Services will be able to focus on the principal functions of the position which are to manage administrative services and give administrative support to both the President and NEC.

Executive Policy Advisor

The labour relations environment of the public service is experiencing major changes and it is safe to say that more changes will come during the next five years when the PSMA will be assessed and amended. There is a need to be more proactive at the level of policy development and lobbying efforts. Moreover, there is a need for more professional support for the NEC and its committees. There is a need to separate from the position of Director of Professional Services certain policy functions and to add to these functions a responsibility to coordinate lobbying.