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1989 Report of the Auditor General of Canada

Main Points

5.1 Considerable progress has been made in implementing the framework for the control and accountability of Crown corporations introduced with amendments to the Financial Administration Act in 1984. Some improvements are possible, but most of the important elements are in place (paragraphs 5.87 and 5.88).

5.2 Most informed observers interviewed believe that the framework, as implemented, represents a vast improvement over the previous situation. Our own observations support the view that vigilance and stability have characterized the Crown corporations sector in recent years (5.23 to 5.86).

5.3 The previous framework applied unevenly to a growing population of Crown corporations. One major improvement is that, except for a few that are exempted, the new framework applies to all parent Crown corporations and, through them, to their wholly owned subsidiaries (5.15 to 5.22).

5.4 The legislation and regulations have established a fixed timetable for submitting to government, and for tabling in Parliament as appropriate, the central control and accountability documents. The timetable is closely monitored and generally observed. This is a sign of respect for the framework, and a precondition for its success (5.25 to 5.41).

5.5 The quantity and timeliness of information Parliament receives about Crown corporations has improved significantly. However, its quality is uneven. The most evident weaknesses are in how objectives are articulated and linked to subsequent performance (5.42 to 5.47).

5.6 Explicit roles assigned by the legislation to appropriate ministers and boards of directors, coupled with a "hands-off" stance by central agencies, have encouraged ministers and boards to take their responsibilities seriously. Ministers generally ensure that the accountability and control documents they are asked to endorse are carefully reviewed. Most boards of directors play a meaningful role in managing Crown corporations (5.22 to 5.72).

5.7 The new framework is comprehensive and provides for reasonable balance among the interests of various players. But the framework set out in legislation is not solely responsible for the demonstrated improvements. Strong and sustained attention by all concerned has played an important part in making the system work.

Introduction

A new control and accountability regime for most Crown corporations

5.8 In June 1984, responding to growing concerns that Crown corporations were not under effective control, Parliament passed Bill C-24, an Act to amend the Financial Administration Act (FAA) in relation to the control of Crown corporations. Bill C-24 established a control and accountability regime for almost all federal Crown corporations by creating a new Part XII of the FAA. Part XII was renumbered to become Part X on 12 December 1988 as a result of the Revised Statutes of Canada, 1985.

5.9 In this chapter we report on the implementation and status of the Part X regime some five years after it came into effect on 1 September 1984. Of necessity, our review focussed on the implementation of the key elements of the control and accountability framework and not on the substantive impact of the regime on the performance and accountability of Crown corporations.

5.10 As defined by the Financial Administration Act, Crown corporations are parent corporations or subsidiaries that are wholly owned, directly or indirectly, by the Crown. Part X provides the framework for the control and accountability of all parent Crown corporations named in Schedule III of the FAA and, through them, of their wholly owned subsidiaries.

5.11 In addition to Crown corporations, the federal government has full or partial ownership interests in a large number of other organizations with a corporate form. These include, for example, the "departmental corporations" that carry out administrative, research, supervisory, advisory or regulatory functions of a governmental nature, and corporations that are owned jointly with other governments or private sector interests. Because such organizations are not defined as Crown corporations they do not fall within the ambit of the control and accountability framework outlined in Part X.

Background

Developments leading to the introduction of the new regime

5.13 The late 1970s and early 1980s saw a growing debate about Crown corporations, fueled in part by specific instances of dubious business practices, huge losses by some Crown corporations, and increased public concern for government accountability. The main focus of the debate was not on the role of Crown corporations as such, but rather on how to strike a proper balance between the need for adequate control and direction by Parliament and government on the one hand, and the need for appropriate independence and accountability of Crown corporations on the other.

5.14 A number of major reviews relating to Crown corporations were completed during this period. These included a "blue paper" published by the Privy Council Office in 1977, the Royal Commission on Financial Management and Accountability (The Lambert Commission), chapters in our 1976, 1979 and 1982 annual reports and a series of reports by the House of Commons Standing Committee on Public Accounts. All of these reviews pointed to the need for a major overhaul of the arrangements then in effect.

Profile of Crown Corporations

New Crown corporations have been promptly scheduled to maintain comprehensive coverage of the regime

5.16 This situation contrasts with that which prevailed before the amended framework was introduced. Then, the legislative framework (Part VIII) applied only to scheduled Crown corporations and not to their wholly owned subsidiaries. In addition, with no requirements for scheduling new corporations, the schedules were not always kept up to date when new corporations were created or acquired, or when corporations changed their status. As a result, the regime was neither comprehensive nor current in its coverage.

5.17 The Financial Administration Act divides parent Crown corporations into two groups:

• Schedule III-Part I includes parent corporations that ordinarily depend on parliamentary appropriations for operating purposes and/or that operate in a non-competitive environment.
• Schedule III-Part II includes parent corporations that, to the satisfaction of the Governor in Council, operate in a competitive environment and do not ordinarily depend on appropriations for operating purposes.

(Exhibit not available)

5.19 Exhibit 5.2 emphasizes the importance of keeping the schedules up to date if comprehensive and current coverage of the control and accountability framework is to be maintained. As this exhibit shows, the Crown corporation situation is dynamic. The net change (-2) in the number of scheduled parent corporations is the result of 10 being created and 12 others being either dissolved or privatized during the intervening period.

(Exhibit not available)

5.20 Although not shown in Exhibit 5.2, the change (-9) in the number of wholly owned subsidiaries over this period of approximately four years is also the net result of considerable activity in creating or acquiring some, and selling or dissolving others. In the year ending 31 March 1988, for example, the number of wholly owned subsidiaries rose from 114 to 125. This increase of 11 resulted from 19 wholly owned subsidiaries being added to the total and 8 being deleted.

(Exhibit not available)

5.21 Exhibit 5.3 provides profiles of Crown corporations at 31 July 1985 and 31 July 1988. The table shows that, in 1988, scheduled Crown corporations employed about 135,000 people and had total assets of nearly $49 billion and liabilities of $37 billion. The data show that employment has declined by nearly 20 per cent over the three-year period, while total assets and liabilities have also decreased slightly. Annual budgetary funding from Canada has declined by 23 per cent, from $4.7 billion to $3.6 billion.

(Exhibit not available)

5.22 Despite this decrease in the size of the federal Crown corporation sector, such corporations continue to be important in the infrastructure of the Canadian economy. Many have a significant position in the sector of the economy in which they operate. Examples include Canada Mortgage and Housing Corporation, Canadian National Railway Company and Petro-Canada.

The Framework for Control and Accountability

The legislation clarified roles and responsibilities and sets up several control and accountability mechanisms

• application to all scheduled parent Crown corporations and, through them, to their wholly owned subsidiaries;
• clarification and articulation of the responsibilities of Parliament, the government, appropriate ministers and boards of directors;
• Parliament's approval of the creation, mandate, financing and disposal of every parent Crown corporation;
• a systematic and timely flow of pertinent information to Parliament to allow it to judge whether Crown corporations are meeting their stated objectives for each planning period, and to hold the government to account;
• government responsibility for the strategic and budget decisions of all parent Crown corporations, and through them, those of their wholly-owned subsidiaries, as well as for directives issued to parent corporations; and
• a rigorous audit regime comprising internal audit, annual external audit and a periodic external special examination.

(Exhibit not available)

The Role of Parliament

The legislation stipulates the information that must be submitted to Parliament

• summaries of the corporate plans and capital budgets of all scheduled parent Crown corporations;
• summaries of the operating budgets of parent corporations named in Part 1 of Schedule III;
• annual reports of parent Crown corporations;
• quarterly and annual reports of the President of the Treasury Board; and
• Governor in Council directives issued to Crown corporations.

(Exhibit not available)

The legislation accords Parliament a direct role in the control and accountability framework

The Role of Government

The legislation assigns to the government the key responsibilities for control of Crown corporations

• Plans and budgets. There were control processes relating to operating and capital budgets before Part X was introduced. However, now there is a new requirement for all parent Crown corporations to submit multi-year corporate plans annually for Cabinet approval on the recommendation of the appropriate minister. This requirement is central to the entire control and accountability regime. It is through the corporate plan that a corporation's objectives and strategies are approved by the government -- and a benchmark is established against which subsequent performance can be assessed.
• Directives. The Governor in Council may issue a binding directive to a parent Crown corporation if it deems it in the public interest to do so. This is done on the recommendation of the appropriate minister, after the minister has consulted the board of directors with respect to the content and potential effect of the directive. It was anticipated from the outset that this power would likely be used sparingly -- and subsequent practice has borne this out. In practice, the government has many other formal and informal means to direct a corporation.
• Transactions concerning subsidiaries. Some transactions of a parent Crown corporation or a wholly owned subsidiary require Governor in Council approval. These include the incorporation or acquisition of a subsidiary; the dissolution or amalgamation of a wholly owned subsidiary; and the sale or other disposal of shares or assets of a wholly owned subsidiary. Part X does not require Governor in Council approval for changes in the mandate of a wholly owned subsidiary. Instead, the mandates of subsidiaries are controlled through a provision prohibiting them from carrying on any business that is not consistent with the objects and purposes of the parent corporation.
• Appointments. According to the legislation, the Governor in Council controls the key corporate appointments in a parent Crown corporation. Directors are appointed by the appropriate minister with Governor in Council approval. It is up to the Governor in Council to appoint, and remove, the Chairman, the Chief Executive Officer and any director who is also an officer of the corporation and to fix their remuneration.

The Crown Corporations Directorate has played an important role in implementing the legislation

(Exhibit not available)

5.30 This Directorate, established in 1984 from groups that had been working on Crown corporation matters separately in Finance and the Treasury Board Secretariat, is the primary means by which the government co-ordinates the management of its Crown corporations. The Directorate serves as the "keeper of the system" and provides advice to Treasury Board ministers and the Minister of Finance on policy issues related to Crown corporations, as well as on their resources, activities and performance. During the period under review, it has put in place the main processes called for by Part X and has co-ordinated those processes with others (such as specific approvals sought through Treasury Board submissions, Cabinet memoranda and the Estimates) that affect the control and accountability of Crown corporations.

The Role of Crown Corporations

The role of the board of directors differs considerably from that of a private sector board

5.32 Nevertheless, the formal role assigned to the board is relatively circumscribed. In many respects it is a consultative role. For example, the appropriate minister is required to consult the board of directors in advance about proposed directives, the appointment of officer-directors and the appointment and removal of auditors. Unlike the private sector, the board of a parent Crown corporation controls neither the appointment nor the remuneration of the Chief Executive Officer.

The legislation sets out an elaborate audit regime

Implementation of the Framework

Parliamentary Level

Important differences between Crown corporations and privately owned corporations

• Ownership. Government ownership represents an investment of public money on behalf of taxpayers. Unlike shareholders in private sector corporations, individual taxpayers cannot divest themselves of their "investments" in Crown corporations and put their funds to alternative uses.
• Financing. Expenditure of public money is authorized by Parliament and may take various forms, including equity, loans or appropriations for operating purposes.
• Objectives. Crown corporations have their mandates approved by Parliament and, in keeping with those mandates, are frequently charged with pursuing public policy objectives that may compete with commercial objectives or, indeed, other public policy objectives.
• Special requirements. Crown corporations are subject to a variety of legislative and other requirements that are not faced by private sector corporations -- for example, employment equity, official languages and access to information.

Parliament requires complete, timely and reliable information on Crown corporations

5.36 Information to Parliament. As noted earlier, the availability to Parliament of complete, timely and reliable information on Crown corporations is essential for accountability. The information to be tabled in Parliament pursuant to Part X includes:

• Summaries of corporate plans, capital budgets and (for Schedule III-Part I corporations) operating budgets. In accordance with regulations issued by the Treasury Board, these summaries have to be laid before each House of Parliament within 30 sitting days of the time the corporate plans and budgets are approved by the Governor in Council and Treasury Board respectively.
• Annual reports of Crown corporations. Annual reports are to be submitted to the appropriate minister and the President of the Treasury Board within three months of a corporation's financial year end. The minister must cause a copy of the report to be laid before each House within 15 sitting days after receiving it.
• Annual consolidated reports of the President of the Treasury Board. No later than 31 December each year, the President of the Treasury Board must table an annual consolidated report on the businesses and activities of all parent Crown corporations for the financial year ending on or before the previous 31 July. In practice, the government has chosen to present this report (Annual Report to Parliament on Crown Corporations and other Corporate Interests of Canada) as Volume III of the Public Accounts of Canada.
• Quarterly reports of the President of the Treasury Board. Within 30 sitting days of the end of each quarter, the President of the Treasury Board is required to table a report on the time of tabling, by appropriate ministers, of annual reports, and summaries of corporate plans and budgets, for Crown corporations subject to the reporting provisions of Part X.
• Governor in Council directives. Copies of any directives given to parent Crown corporations by the Governor in Council must be tabled within 15 sitting days after the directive is given.

The quantity and timeliness of information to Parliament has improved

5.38 The requirement to table corporate plan summaries is completely new, as is the requirement for quarterly reports on the timing of tablings. Both help instill discipline into the process. The information available in the annual consolidated report of the President of the Treasury Board is much more comprehensive than similar information available to Parliament before Part X came into effect. Means for giving more general visibility to this important information might be considered.

5.39 Exhibit 5.5 shows, for each of the last four years, the number and percentage of reports tabled within the time frames established by statute or regulation. The table shows that in 1988, 88 per cent of corporate annual reports were tabled by the deadline. In contrast, our 1982 report on the accountability of Crown corporations showed that, in 1981 and 1982, over half the annual reports were tabled more than six months after the end of the financial years involved.

(Exhibit not available)

5.40 The record for tabling the corporate plan and budget summaries on time is not as good as for annual reports. The data show that in 1988, 63 percent of corporate plan summaries and 52 percent of budget summaries were tabled by the statutory deadline, with another 20 percent and 19 per cent, respectively, being tabled within 30 sitting days after the deadline. There was some improvement in 1988 compared with the three previous years.

5.41 The President of the Treasury Board has written to the appropriate ministers each year since 1986, drawing their attention to the record of the previous year and urging greater compliance. Nevertheless, this is an area where there is room for further improvement. The deadlines are established by regulation and, other than in exceptional circumstances, full compliance should be expected.

The quality of information to Parliament has weaknesses

5.43 The quality of corporate plan and budget summaries has improved over the four cycles (1985 to 1988) that we reviewed. Our analysis of a sample of corporate plan summaries tabled in 1988 shows that most address the key aspects of the related plans, such as objectives, strategies and performance measures for the planning period. Nevertheless, the degree of coverage varies, and some summaries do not provide a good reflection of original documents. In addition, a number of the summaries reviewed did not follow the "Guidelines for the preparation of Summaries of Corporate Plans, Capital Budgets and Operating Budgets" issued by the Treasury Board in March, 1987. We concluded that further improvements are desirable and possible.

Processes are lacking for ensuring the quality of corporate plan and budget summaries and monitoring adherence to guidelines

Annual reports rarely state, as required, the extent to which the corporation has met its objectives

5.46 Treasury Board has not exercised its right to require specific quantitative performance information in annual reports. Although in practice many corporations do include some quantitative information on performance, such information is rarely linked (or able to be linked) to objectives.

5.47 Part X provides that Treasury Board can make regulations concerning the form and content of annual reports and corporate plan and budget summaries. Although guidelines (as distinct from regulations) on the content of summaries have been issued, neither guidelines nor regulations are yet available on annual reports. At the time of our study, the Crown Corporations Directorate was drafting annual report guidelines.

Much of the information provided to Parliament during the period under review was not used explicitly

5.49 We concluded that, with few exceptions, neither the House of Commons nor the Senate (including committees and individual members or senators) made much explicit use of the information about Crown corporations tabled during the period under review. Nor did either House, or any of the committees we examined, review the plans and performance of Crown corporations per se. Rather, this was done as Crown corporation matters were considered in the context of a particular issue (for example, specific to a region or constituency). In those instances, the information tabled did provide relevant background information to parliamentarians.

5.50 In considering Parliament's use of the information it is important to recognize that it is through the appropriate minister that Crown corporations are ultimately accountable to Parliament. The role that Parliament has set out for itself is to see that ministers carry out their responsibilities -- not to monitor or oversee Crown corporations directly.

5.51 Therefore, the fact that the use of information appears to be limited does not necessarily indicate that the information lacks overall utility or that it does not make an important contribution to the accountability of Crown corporations. One important consequence of tabling information in Parliament is that it serves to inform the public at large about Crown corporation matters. The principal benefit to Parliament of having the information tabled, however, is the assurance that appropriate ministers have focussed on, and endorsed, the strategic orientation of Crown corporations and have reviewed their performance -- at least to the extent that the annual reports address performance. In addition, there is the discipline of having to prepare and defend the information that is imposed on the Crown corporations.

Government Level

The appropriate minister, the Governor in Council, the Treasury Board and the Minister of Finance have the key roles

(Exhibit not available)

5.53 In carrying out this study, we interviewed senior executives in central agencies and departments, as well as Chief Executive Officers and other directors of a number of Crown corporations. With isolated exceptions, there was broad agreement among those interviewed that the general approach of the government to Crown corporations was businesslike, co-operative and mindful of the need not to interfere in day-to-day operations. Our own observations bear out these comments.

The appropriate minister has specific powers in the control and accountability framework

• recommending the issuing of directives;
• appointing directors, subject to concurrence by Governor in Council;
• recommending corporate plans for the approval of Governor in Council and operating and capital budgets for the approval of Treasury Board;
• tabling annual reports and summaries of plans and budgets in Parliament;
• agreeing to any borrowing by the corporation;
• receiving the annual audit report and, on an exception basis, information from a special examination; and
• receiving reports on material developments.

5.56 The common understanding among those we interviewed was that appropriate ministers, not central agencies, are responsible and accountable for Crown corporations. It was emphasized that the appropriate ministers are the "shareholders" to whom boards of directors are accountable. The Treasury Board, supported by its officials, is responsible for the sound management of the Crown corporation portfolio, including the allocation of resources to Crown corporations, and for ensuring compliance with the Financial Administration Act.

Ministerial control generally focusses on objectives and budgets rather than on day-to-day operations

5.58 The degree to which ministers are supported in their role by their departmental staff varies a great deal, depending largely on the relevance of a particular Crown corporation to the policy concerns of the department. Thus, although some departments provide detailed advice to their minister on such matters as the corporate plans and budgets proposed by a Crown corporation, other departments are not consulted at all.

5.59 Governor in Council, Treasury Board and the Minister of Finance. As Exhibit 5.4 shows, the Governor in Council, the Treasury Board and the Minister of Finance have wide statutory authority to dispose of Crown corporation matters. This includes the authority to make regulations pursuant to Part X, as well as specific authority for such matters as recommending and approving corporate plans and budgets, approving borrowing, issuing directives, appointing directors and auditors, and so on.

(Exhibit not available)

The Crown Corporations Directorate ensures that key mechanisms are in place and functioning well

5.61 Since Part X came into effect, CCD has invested considerable effort in getting the key mechanisms in place and functioning satisfactorily, and in educating and prompting other players to play their parts. In addition, it has served as an early-warning system for appropriate ministers and the government, particularly to signal potential financial difficulties, and has acted as a catalyst to initiate and organize reviews of corporate mandates. In our view, this has been an appropriate role.

Corporate plans and budgets have been timely and generally in compliance with regulations

5.63 In this regard, there has been significant improvement compared with the period before the Financial Administration Act was amended. In that period it was not uncommon for budgets to be submitted late. In our 1982 report on the accountability of Crown corporations we noted that in that year, for example, most capital budgets had been approved after the start of the financial year. In one case, approval had not come until after the end of the year to which the budget applied. By contrast, since Part X has come into effect, there have been relatively few instances of plans or budgets not being approved before the commencement of the financial years to which they apply.

5.64 Regulations issued by Treasury Board specify not only the time within which corporate plans and budgets are to be submitted, but also their form and content. The scope of our study did not extend to a review of the quality of information in corporate plans and budgets, but we found that, in form and content, compliance with the regulations is generally good and has been improving. It is worth noting also that the Crown Corporations Directorate has established mechanisms to monitor and promote compliance with the regulations.

Corporation Level

The Financial Administration Act assigns certain management responsibilities to the board of directors but assigns the key powers to the government

5.67 On the face of it, however, the powers given to the board by the Financial Administration Act are not commensurate with the general responsibility it has been assigned. As was noted earlier (and as Exhibit 5.4 indicates), the formal role of the board is relatively circumscribed. The key powers have been allocated to the government. For example, the board does not appoint the Chief Executive Officer, nor does it have the final say on corporate plans and budgets. Similarly, although the board can make, amend or repeal by-laws, in this regard also, the Governor in Council has ultimate authority.

(Exhibit not available)

The government generally gives boards of directors considerable scope for action and many have assumed a stronger role than might be expected

5.69 One development that has had the effect of increasing the apparent independence of boards of directors in managing Crown corporations is the reduction in the number of public servants appointed to boards. The general practice is that public servants are not appointed as Crown corporation directors unless required by a corporation's enabling legislation. In the three year period from 1984-85 to 1987-88, the proportion of parent Crown corporations with one or more public servants on the board of directors fell from about one half to less than a third.

5.70 The end result of the way the government has used its powers is that many boards of directors, although not all, have assumed a stronger role than might be expected in managing Crown corporations. Significant aspects of that role include the following:

• The board of directors helps set the strategic direction of the corporation by reviewing management proposals and endorsing corporate plans submitted to the appropriate minister. Ultimate authority for approving the plans rests with the government, but the practice in recent years has been that most are approved without major changes. The power of the board to endorse or modify plans is thus important, as they are very likely to be accepted.
• Boards of directors monitor whether management pursues the approved strategic direction of the corporation and attains objectives. They do this on the basis of information from management and from the internal and external audit functions.
• The legislation provides that the Governor in Council is responsible for setting the remuneration, including performance pay and bonuses, of officer-directors (for example, the Chief Executive Officer). However, government guidelines issued in 1987 require boards of directors to assess annually the performance of officer-directors for purposes of making recommendations concerning remuneration. In the case of a Chief Executive Officer, for example, such assessments are based on the performance of the corporation in relation to its corporate plan, as well as the performance of the individual against pre-determined objectives.
• Boards of directors are responsible for fixing any benefits other than remuneration provided to the Chief Executive Officer, and for appointing officers other than officer- directors.
• Boards of directors set out in by-laws the duties and responsibilities of officers and officer-directors. Although Part X provides that the Governor in Council may direct the board of directors of a parent Crown corporation to make, amend or repeal a by-law, this power has not been exercised to date.

Few of the Crown corporation directors we interviewed had been briefed on their duties

The legislation requires three types of audits -- internal audits, annual audits and special examinations -- and the establishment of audit committees

(Exhibit not available)

5.74 In addition to mandating the three types of audit, Part X requires that parent Crown corporations, and wholly owned subsidiaries that have separate annual auditor's reports, establish audit committees to oversee internal audits; to review and advise the board of directors about financial statements to be included in the annual report of the corporation; and to advise the board about annual audits and special examinations. An audit committee comprises at least three directors, the majority of whom are not officers or employees of the corporation or any of its affiliates. Our study showed that Crown corporations generally have set up audit committees to carry out the duties defined in the legislation.

Crown corporations must carry out internal audits to assess the corporation's compliance with specific legislative provisions

(Exhibit not available)

5.76 Some Crown corporations with well developed internal audit functions moved quickly to assume the internal audit responsibilities assigned by Part X. In some others, however, carrying out internal audits along the lines required by Part X has gotten off to a slow start. It would be unrealistic to expect all, or even most, corporations to have implemented the new and extensive internal audit requirements in the relatively short period since Part X came into force. It takes time to build up internal audit teams and to develop the methodologies and experience required.

5.77 It is evident that some Crown corporations will be seeking exemptions from the internal audit requirement following the completion of the first special examinations. In the meantime, the Crown Corporations Directorate has developed a policy on the process for seeking and granting exemptions.

The legislation introduced some new annual audit requirements

5.79 First, there is a requirement that, if requested by Treasury Board, the auditor will provide an opinion on the accuracy, in all material respects, of any quantitative performance information in the corporation's annual report. This potentially important provision, which recognizes that a Crown corporation's financial statements seldom fully reflect its performance, has not yet been implemented.

5.80 The Crown Corporations Directorate currently receives quarterly reports on the performance of Crown corporations and uses the information to keep Treasury Board ministers briefed on developments. With the experience in developing and reporting performance indicators that has been built up in this manner over a number of cycles, the government should encourage (and even require) corporations to include such information in annual reports and ask auditors to apply the corresponding audit provision.

5.81 Second, Crown corporations are required to prepare their financial statements in accordance with generally accepted accounting principles (GAAP). There has been some difficulty in applying GAAP consistently across corporations in such areas as the accounting treatment of appropriations and capital and operating leases, as well as the valuation of assets and liabilities in some cases. There may be an opportunity here for the Treasury Board to exercise its power to make regulations concerning financial statements generally and, specifically, to augment or supplement GAAP so as to promote more consistent and meaningful disclosure. The Office of the Comptroller General of Canada, in conjunction with the Crown Corporations Directorate, is reviewing Crown corporation accounting practices to determine whether such guidance is necessary.

A special examination of management systems and practices is required at least once every five years

5.83 At the time of preparing this report, it seemed probable that, with isolated exceptions, special examinations would be completed in all Crown corporations within the first five years of the introduction of Part X in September 1984.

Most directors interviewed thought the special examinations were valuable, but some thought they constituted an unnecessary expense

5.85 This Office, as the sole or joint auditor of 34 of the 44 scheduled parent Crown corporations, is carrying out an internal review of experience with the first cycle of special examinations. The primary purpose of the review is to identify ways of improving this important process in future cycles.

Can a board of directors hold the corporation's senior management to account when all board members are officers of the corporation?

Conclusion

5.88 Our review showed that a great deal of progress has been made and that all the fundamental processes are in place. However, some points deserve further attention. These include:

• meeting deadlines for tabling, in Parliament, corporate plan and budget summaries, and corporate annual reports;
• improving the quality of corporate plan summaries as a reflection of the corporate plans and as yardsticks for subsequent reporting of performance in annual reports;
• strengthening linkages between objectives articulated in summaries and subsequent reporting of performance in annual reports;
• briefing new directors on their duties under the Part X regime and on the Crown corporations to which they are appointed;
• assessing the need to exercise Treasury Board's right to request the audit of quantitative performance information and its right to make regulations to augment or supplement generally accepted accounting principles so as to promote more consistent and meaningful disclosure; and
• reviewing the need for exceptions from the rule that all Crown corporation boards should have a majority of directors who are not officers or employees of the corporation.