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1983 Report of the Auditor General of Canada

1983 Report

Appendix C—Reports of the Standing Committee on Public Accounts to the House of Commons

REPORT TO THE HOUSE

Tuesday, March 29, 1983

The Standing Committee on Public Accounts has the honour to present its

EIGHTEENTH REPORT

1. In accordance with its permanent Order of Reference contained in the Standing Orders of the House of Commons, your Committee has considered the Report of the Auditor General of Canada to the Minister of Agriculture on the Comprehensive Audit of the Canadian Dairy Commission (CDC), which was tabled in the House of Commons on July 16, 1982.

2. The co-operation of the witnesses who appeared before your Committee is acknowledged and appreciated.

3. Your Committee noted the observations and recommendations contained in the Comprehensive Audit Report of the Auditor General on the Canadian Dairy Commission. Your Committee was pleased to find that the Minister of Agriculture has instructed the CDC to conform with each of the recommendations and to report back to him on their completion and implementation.

4. In its Second Report to the House, dated April 11, 1978, of your Committee concluded that the CDC was deficient in the areas of financial planning, reporting and managerial control and recommended several measures to strengthen the financial management, control and accountability of the CDC to Parliament. Your Committee has not yet seen any satisfactory response-to its recommendations in this regard from the CDC.

5. Your Committee observes that the Government, in Bill C-85 (Canagrex), proposed improved financial management, control and accountability of Crown corporations. Such proposals call for proper books of account, an annual audit, submissions to the Minister, the President of the Treasury Board and Cabinet for approval of corporate plans, operating and capital budgets, and the tabling of an annual report to Parliament. Your Committee concludes that such provisions need to be included in the Canadian Dairy Commission Act in order to hold the CDC more accountable to the Minister of Agriculture and Parliament.

6. Your Committee therefore recommends:

(a) that the Government give consideration to the advisability of amending the Canadian Dairy Commission Act to provide for improved financial management, control and accountability of the CDC to Parliament; and report back to the House in accordance with Standing Order 69(13);

(b) that the Minister of Agriculture provide the Public Accounts Committee before June 30, 1983 with a progress report on the implementation of the 36 recommendations contained in the Auditor General's Comprehensive Audit Report of the CDC; and a timetable to indicate when each recommendation will be implemented; and

(c) that the Minister of Agriculture request the Auditor General undertake a follow-up audit in the CDC and report back on the progress on the implementation of the recommendations of the Comprehensive Audit Report in his Annual Report of 1984.

7. A copy of the relevant Minutes of Proceedings and evidence (Issues Nos. 63,64,65 and 75 of the First Session of he Thirty-second Parliament) is tabled.

Respectfully submitted,

BILL CLARKE

Chairman

REPORT TO THE HOUSE

Monday, May 30, 1983

The Standing Committee on Public Accounts has the honour to present its

NINETEENTH REPORT

1. In accordance with its permanent Order of Reference contained in the Standing Orders of the House of Commons, your Committee has considered the Report of the Auditor General to the House of Commons for the fiscal year ended March 31, 1982 and, in particular, Chapter 2 on the Accountability of Crown-owned Corporations.

2. The co-operation of the Honourable Herb Gray, President of the Treasury Board, and the other witnesses who appeared before your Committee is acknowledged and appreciated.

3. In this Report your Committee wishes to direct its comments to all corporations that are controlled by the Government and will therefore use the phrase "government-controlled corporation" to refer to corporations which are either wholly-owned by the Government or controlled by the Government through partial ownership. In adopting this usage, your Committee notes that the Auditor General used the phrase "Crown-owned corporation" to indicate that the scope of his review of Crown corporations was limited to wholly owned corporations.

Previous Reports

4. Your Committee's Report on Polysar, dated July 7, 1977, was the first of five major reports to the House on the subject of the accountability of government-controlled corporations. The recommendations made in these reports remain valid and address many of the issues raised by the Auditor General's accountability framework for Crown corporations. The recommendations of your Committee's past reports form the basis for this report and, accordingly, the following paragraphs summarize these recommendations.

5. The Polysar Report dealt with the topics of directing, reporting and audit that the Auditor General identified in his general accountability framework. In that report, your Committee recommended that:

    - the Government monitor compliance with its policy guidelines on corporations' commercial practices, penalize non-compliance, and report to Parliament;
    - the Government issue guidelines on the operations and objectives of foreign subsidiaries to ensure parliamentary scrutiny;
    - Ministers be represented on boards of directors and audit committees;
    - audit committees meet standards regarding their establishment, composition, meetings, and attendance of the Auditor General;
    - standards of conduct of business practices be established and complied with;
    - auditors adopt consistent standards of reporting to Ministers and Parliament;
    - auditors furnish the Auditor General with reports, financial statements, and other information he needs, and consult regularly with him;
    - the Auditor General have access to corporation records and the right to conduct investigations; and
    - the Auditor General develop a manual for auditors' reporting.
6. The Atomic Energy of Canada Limited (AECL) Report, dated February 27, I 978, addressed the Auditor General's accountability themes of authorization, mandate, and directing. Your Committee recommended that:

    - there be mandatory parliamentary review of Crown corporations' objectives when corporations significantly change their activities;
    - the Government ensure the following: enunciation of boards of directors' responsibilities and duties; qualifications of senior management; approval of contracts with significant financial risk; a code of business ethics; and central agency monitoring of financial practices; and
    - boards of directors ensure the following: better definition of senior management job requirements; limits on delegation of authority to officers; quality standards on information from management; duties of financial officers in contracts or payment processes clearly defined; decisions clearly recorded in minutes; and codes of business ethics better defined than the Government's 1976 guidelines.
7. The Crown Corporations Report, dated April 12, 1978, dealt with all the issues raised by the Auditor General's accountability framework, viz. authorization, mandate, financing, directing, controlling, reporting, and audit. In that report, your Committee recommended that:

    - the Financial Administration Act be amended as follows:
    an appropriate definition of "government-controlled corporation"; scheduling of all government-controlled corporations based on criteria of degree of dependence on public funds, the nature of the operations and the degree of public ownership; annual review of this scheduling; orderly, public addition to or deletion from schedules; provision to Parliament of a current listing and other pertinent information for all government-controlled corporations; and
    - the following provisions govern corporations dependent on government financial support or providing services not likely to be undertaken by the private sector: approval of loans and equity investments only when these can be repaid out of earned income; adequate, integrated information on spending plans be provided to Parliament and Government; improved Public Accounts reporting based on Generally Accepted Accounting Principles; auditors' mandates, where appropriate, to include auditing of economy, efficiency and effectiveness; Comptroller General to set guidelines for acceptable standards of financial management; and immediate Treasury Board action to remedy existing deficiencies.
8. The Fourth Report of your Committee, dated February 20, 1981, was concerned with the issue of comprehensive audit of Crown corporations and recommended that:

    - the Government, in legislation, authorize comprehensive audit by the Auditor General in wholly-owned corporations; and
    - the comprehensive audit be based on a preliminary survey and concurred in by the board of directors.
9. The Fifteenth Report, the most recent of your Committee's reports on the accountability of Crown corporations, dated May 26, 1982, dealt with the Auditor General's issues of authorization, mandate, financing, and reporting. This report recommended Crown corporation legislation to enable the following: setting objectives for government-controlled corporations; improving Government's and Parliament's monitoring and controlling of corporations' use of public funds; and establishing a new ministry to oversee and report to Parliament on all Crown corporations.

10. As is amply demonstrated by the reports outlined above, your Committee has repeatedly recommended that the Government improve the accountability to Parliament of the corporations it controls. These recommendations have not been implemented. Where your Committee has recommended immediate action by a Government central agency (e.g. Treasury Board, in the 1978 Crown Corporations Report), the response has been: "awaiting Crown corporation legislation." To date, no such legislation has been passed. Your Committee must therefore conclude that the Government's accountability regime for the corporations it controls remains seriously deficient.

Recommendations

11. (a) Your Committee recommends that the Government create a Ministry for Government-Controlled Corporations, which would eliminate the need for the Crown Corporations Division of Treasury Board Secretariat.

(b) Your Committee further recommends that this Ministry take the following action:

(i) recognize government-controlled corporations as instruments of public policy, with statements of objectives in legislation, communicate government priorities and directives clearly to them, and table these priorities and directives in Parliament on a timely basis;

(ii) table in Parliament any statutory instrument which creates or approves acquisition or disposal of any government-controlled corporation and subject it to debate;

(iii) classify all government-controlled corporations according to clear criteria, schedule them in the Financial Administration Act, and regularly review these classifications;

(iv) monitor and control the appointment, dismissal, compensation, duties and responsibilities of government-controlled corporations' directors and senior officers (including conflict of interest rules and corporate by-laws);

(v) control government-controlled corporations' spending, commitment, and borrowing where public funding is involved, and set standards for the approval of capital and operating budgets, corporate plans, external borrowing, guarantees, and compensation for activities on behalf of the Government;

(vi) require government-controlled corporations that receive public funding to submit an annual report to relate specific payments of public monies to results achieved. This report should be added to the corporation's audited financial statements and be published in the Public Accounts;

(vii) ensure that reports, returns and other documents required to be tabled in Parliament by statute or regulation are tabled on time;

(viii) provide Parliament annually with a summary of the corporate plan of each government-controlled corporation; and

(ix) implement a program of comprehensive auditing in all government-controlled corporations.

12. Your committee requests that the Government respond to the foregoing recommendations in accordance with Standing Order 69 (13).

13. A copy of the relevant Minutes of Proceedings and Evidence (Issues Nos. 67,68,82 and 83 of the First Session of the Thirty-second Parliament) is tabled.

Respectfully submitted,

BILL CLARKE,

Chairman.

REPORT TO THE HOUSE

Monday, May 30, 1983

The Standing Committee on Public Accounts has the honour to present its

TWENTIETH REPORT

1. In accordance with its permanent Order of Reference contained in the Standing Orders of the House of Commons, your Committee has considered the Report of the Auditor General of Canada for the fiscal year ended March 31, 982 and, in particular, Chapter 2-Accountability of Crown owned Corporations insofar as the Canada Post Corporation (CPC) is concerned. Further, your Committee reviewed the responses of the CPC to the Committee's Sixteenth Report, dated June 23, 1982.

2. The co-operation of the witnesses who appeared before your Committee is acknowledged and appreciated.

3. Your Committee heard testimony regarding the Corporation's response to an improved accountability framework. Your Committee was pleased to note that the Canada Post Corporation Act has addressed many of the concerns raised by the Auditor General in his 1982 and earlier reports and by this Committee with respect to the accountability of government controlled corporations to Parliament. Officials of the Corporation responded favourably to each of the areas of concern: mandate, authorization, reporting, financing, directing, controlling, and auditing of Crown corporations. In particular, your Committee was most interested in those reporting provisions in the Act that permit Parliament and the Canadian public to be informed, on a formal and regular basis, of major changes in the Corporation's policies, regulations and operations. Your Committee would like to see similar provisions in new legislation for government-controlled corporations.

4. The President of the CPC presented a report to your Committee on the performance of the Corporation in 1982 with respect to its objectives for the quality of service, labour relations, and financial self-sufficiency. Your Committee is satisfied that progress is being made by the Corporation in each of these areas, although much has yet to be done before its corporate objectives are met. Members were particularly interested in the Corporation's actions to reduce its deficit and move towards its goal of financial self-sufficiency. Your Committee will continue to monitor the Corporation's progress in these areas.

5. Your Committee is concerned that the Corporation has not tabled its annual report for the fiscal year ended March 31, 1982 thus contravening its new legislation. Furthermore, the CPC is certain to miss its next legislative deadline of June 30, 1983. As well, the Corporation's capital budgets for fiscal years 1982-83 and 1983-84 have not yet been tabled. Because these unusual delays are caused by a number of key financial questions that have yet to be resolved between the Government and the Corporation, your Committee strongly urges that a much higher priority be placed on the resolution of these issues. Until this is done, neither Parliament nor the shareholder or the Canadian public will be able to evaluate the financial performance of the CPC.

6. Your Committee was pleased to note a willingness on the part of the Corporation's officials to permit the Auditor General to conduct a follow-up to his 1980-81 comprehensive audit of the former Post Office Department some time in 1984; and that there is agreement in principle by the Corporation to a future comprehensive audit. Your Committee reemphasizes its earlier recommendation, in its Sixteenth Report to the House, for the Government to retain the services of the Auditor General as a joint auditor of the Corporation at least until such time as the Corporation achieves financial self sufficiency.

7. Your Committee recommends that:

(a) the Government and the Corporation take immediate steps to resolve the major financial questions that relate to the change-over from the Post Office Department to the new Corporation;

(b) the Corporation finalize and present to the Minister as soon as possible the 1982 and 1983 financial statements; and

(c) the Corporation report back to your Committee by December 31, 1983 on the progress relative to the 18 performance indicators, labour relations and financial self-sufficiency.

8. Your Committee requests that the Government respond to recommendation 7(a) above in accordance with Standing Order 69(13).

9. A copy of the relevant Minutes of Proceedings and Evidence (Issues Nos. 73, 74, 82 and 83 of the First Session of the Thirty-second Parliament) is tabled.

Respectfully submitted,

BILL CLARKE,

Chairman,