1989 Report of the Auditor General of Canada

Main Points

17.1 Regulations are important and pervasive instruments of national and international policy. In 1985-86, regulatory programs cost the government an estimated $2.7 billion and Canadians about $30 billion (paragraphs 17.4 and 17.6).

17.2 In 1986, the government implemented new administrative procedures for developing regulations, requiring ministerial and public servant accountability, full public participation, impact assessments of regulations, public disclosure of key information and periodic review of regulatory programs (17.11).

17.3 In our opinion, the government's new procedures for developing regulations support essential elements of public sector accountability. Our audit of the extent to which branches of four departments comply with the procedures found that (17.35 to 17.46):

• Accountability for the development of regulations is, for the most part, clear.
• Major improvements are needed in the public reporting of key information on regulations such as significant commercial benefits to private sector firms and costs to the government.
• Departments do not always provide all interested parties equal and consistent opportunities for consultation on proposed regulations.
• Departmental studies, at times, do not use the same approach to assessing benefits and costs of proposed regulations. A lack of a consistent approach can make some regulations appear to have higher benefits or costs than others.
• Departmental evaluations of regulatory programs need to be improved.
• In some cases, practical alternatives to a proposed regulation were not identified and assessed.
• The work of the Standing Joint Committee for the Scrutiny of Regulations is essential for maintaining Parliamentary control over regulation-making powers delegated to the government by Parliament.

Introduction and Background

17.4 Regulations are important and pervasive instruments of national and international policy. At the end of 1988, about 360 statutes were identified as being in force in the 1985 Revised Statutes of Canada. It is commonplace for Parliament to delegate to Cabinet its power to make certain laws within the framework of these Acts. These laws are often referred to as delegated legislation or regulations. Like legislation, they confer legally enforceable rights and impose legally enforceable obligations on citizens.

17.5 About 2,800 regulations approved by Cabinet or by individual ministers are listed in the Consolidated Index of Statutory Instruments. Their objectives range from protecting Canadians from threats to health and safety and from unfair business practices, to implementing international agreements which affect Canada's economy and environment. The Montreal Protocol for reducing the use of ozone-depleting chemicals, and the Canada-United States Free Trade Agreement, are examples of international commitments being extensively implemented through regulation.

17.6 In addressing areas critical to the Canadian public interest, regulations also impose significant costs. The 1985 Ministerial Task Force on Program Review (Nielsen Task Force) identified 146 federal regulatory and regulatory-related programs. The Review estimated that in 1985-86 the programs involved 34,500 persons and cost the government, including compliance monitoring and inspection, an estimated $2.7 billion. Canadians, according to the Review, paid hidden costs estimated to be at least $30 billion annually.

17.7 Broad reviews of regulatory programs and reform have been conducted, in 1980 by a Special House of Commons Committee and in 1985 by the Nielsen Task Force. One of the elements examined was the government's process for developing and approving regulations. In 1986, the government implemented new government-wide administrative procedures for developing and approving regulations. Our audit focused on the extent to which branches of four departments had complied with the government's administrative policy.

17.8 The findings of the House of Commons Committee and the Nielsen Task Force which focus on the regulatory process are outlined below. These findings provide a historical context for our conclusions and recommendations.

17.9 The 1980 report of the Special House of Commons Committee recommended improvements to the regulatory process. These included:

• strongly endorsing the principle of consultation, noting that early consultation is a fundamental feature of regulatory reform.
• stressing the importance of a disciplined approach to decision-making and recommending that all proposed regulations be subjected to an appropriate impact assessment, including consideration of such basic questions as: What is the problem? What alternative solutions have been considered? How will the proposal help? What are its drawbacks and advantages? Who will gain and who will lose? Why is regulation the best means of dealing with the problem?
• recommending that alternative solutions, "include policy instrument alternatives other than regulations such as taxes or subsidies, not simply alternative levels or standards of regulation."
• recommending that departments and agencies ensure that all their regulatory activities are evaluated periodically.

17.10 The 1985 Nielsen Task Force found problems with the federal regulatory process:

• There was "not a federal regulatory 'system' per se." There was "a largely unstructured, uncontrolled, highly variable, and thoroughly confusing mixture of legal requirements, policy guidelines, and ad hoc administrative practices."
• The government had "no effective mechanism to plan or control, on an overall basis, federal regulatory intervention in the private sector."
• There was "a multiplicity of arrangements for developing, approving, and implementing regulation. The combination of inconsistent policies and procedures from department to department...seriously detract from the efficiency, effectiveness, and fairness of federal regulation."
• Arrangements for private sector consultation were inadequate. "Federal consultation on proposed regulatory intervention was seen as uneven and inconsistent...There is no encouragement of procedures and approaches by regulators designed to ensure that all interests have a reasonable opportunity for participation and involvement in the regulatory process."
• The Socio-Economic Impact Assessment process was "inadequate, poorly supported and appears to be largely ignored."
• The government did not "have an effective mechanism for systematically evaluating existing regulatory programs and for deciding whether to continue, abolish or modify them."

17.11 The government's new administrative procedures, implemented in 1986, sought to address problems in the regulatory process. The principles underlying the procedures are stated in the Guiding Principles of the Regulatory Policy and the Citizens' Code of Regulatory Fairness. The major elements are:

• clear accountability of ministers and officials for regulatory actions;
• full opportunity for public consultation and participation in the regulatory process;
• an assessment of proposed regulations to ensure that benefits clearly exceed costs;
• clear and reliable public information on regulatory requirements and why they have been adopted;
• evaluation of the effectiveness of regulatory programs; and
• a secure foundation in law for actions of regulatory authorities.

17.12 The Regulatory Affairs Branch (RAB) of the Office of Privatization and Regulatory Affairs (OPRA) was established to help implement the administrative policy. Its objective is to promote public access to and involvement in the regulatory process. RAB is responsible for developing policies and procedures for the federal regulatory process, notably The Federal Regulatory Process: Documents and Guidelines. Its role is to co-ordinate regulatory action, exercise a service and challenge function, review departmental regulatory proposals to ensure that they meet the government's regulatory policies and advise its Minister on the proposals. The Minister is a member of the special cabinet committee that approves the proposals.

17.13 How the new Federal Regulatory Process is supposed to work: Departments and agencies are responsible for developing regulations permitted by the legislation they administer. They are also responsible for consulting widely on the proposals. The regulatory process, illustrated in Exhibit 17.1, is described below.

(Exhibit not available)

17.14 To ensure that interested parties are aware of regulatory proposals, the government requires that early notice of an intention to regulate be published in the annual Federal Regulatory Plan. The information required in the 1988 and 1989 Plans included a description of the proposed regulation, anticipated impacts, statutory authority for the regulation, expected date of publication in the Canada Gazette and the departmental staff person to contact for further information.

17.15 Before and after notification in the Annual Federal Regulatory Plan, departments and agencies are expected to consult with interested parties. They are also expected to conduct impact assessments of not only proposed regulations but also alternatives to regulation such as subsidies, taxes and consensus standards.

17.16 To proceed further, a department or agency is required to obtain cabinet approval for prepublishing the regulation and a Regulatory Impact Analysis Statement (RIAS) in Part I of the Canada Gazette. Prepublication is intended to allow for further comment and review by interested parties.

17.17 The RIAS is expected to contain information on why the proposed regulation is necessary, how it conforms with the government's regulatory policy, who was consulted and what their views were, what alternatives were considered and how the department intends to monitor compliance.

17.18 The RIAS process recognizes that regulations have benefits and costs to society as a whole as well as to specific sectors such as small business, and regional and environmental interests. It therefore requires that benefits and costs be assessed and "winners" and "losers" identified.

17.19 The policy allows for confidential information, such as commercially-sensitive data, to be protected from public disclosure.

17.20 The crucial function of the RIAS is to provide:

• Ministers with the information they require to make sound regulatory decisions; and
• the public with detailed information on federal regulatory proposals.

17.21 Before a regulation is submitted to Cabinet for prepublication approval, the RIAS is reviewed by RAB and the legal aspects of the regulation are reviewed by the Privy Council Section of the Department of Justice (PCOJ).

17.22 PCOJ's role is to review the regulation to ensure that it meets the requirements of section 3 of the Statutory Instruments Act; for example, that the regulation is authorized by statute and does not violate the Canadian Charter of Rights and Freedoms.

17.23 The prepublication phase normally lasts a minimum of thirty days. Based on any comments it receives, a department may either revise the proposed regulation or request final approval by Cabinet for publication in Part II of the Canada Gazette. Once approved by Cabinet or individual ministers and registered, the regulation becomes law, but it is not normally enforceable until published in Part II of the Gazette.

17.24 The policy contains provisions for exempting regulations from prepublication; Cabinet must approve all exemptions.

17.25 Finally, the administrative policy requires that departments evaluate regulatory programs on a seven year cycle. Evaluations are undertaken by departments subject to technical guidance and quality control by the Office of the Comptroller General.

17.26 A Standing Committee of the Senate and the House of Commons reviews enacted regulations. The 1969 Report of the Special Committee on Statutory Instruments to the House of Commons recommended that a Standing Committee be established to review regulations. It based its recommendation on the principle that "parliamentary democracy is a system of government that requires the executive to be responsible to the legislature and that both be accountable to the people, and that there can be neither responsibility nor accountability where there is no knowledge of what has been done."

17.27 The 1969 Report led to the establishment of the Standing Joint Committee of the Senate and of the House of Commons for the Scrutiny of Regulations(SJC). The Committee is authorized to scrutinize all regulations after they have been approved by Cabinet or individual ministers. For example, regulations are reviewed to ensure that they are authorized by legislation, conform to the Canadian Charter of Rights and Freedoms, do not impose a charge, fine or penalty without legislative authority and do not trespass unduly on rights and liberties. The Committee recommends changes to regulations that it concludes do not conform to these criteria.

Scope - Special Audit

17.28 We conducted a special audit to determine the extent to which selected branches of four departments complied with the new regulatory process. Our audit included the Environmental Protection Directorate of Environment Canada; the Canadian Coast Guard, Transport Canada; the Occupational Health and Safety Branch, Labour Canada; and the Bureau of Radiation and Medical Devices, Health and Welfare Canada. We audited the process each used to develop regulations and reviewed recent regulations that had passed at least through the impact assessment phase. We reviewed the adequacy of consultation, the technical quality of impact assessments, the completeness of information provided to interested parties and the evaluation of regulatory programs. We also noted whether legal issues raised by the SJC were being resolved in a timely manner. For the most part our audit criteria were based on the requirements of the government's regulatory process. We developed additional criteria where needed.

17.29 We did not review the cost-effectiveness of the programs or the adequacy of regulatory compliance and enforcement.

17.30 A Special Audit covers matters that cut across government departments. By auditing several departments, the objective of a special audit is to identify significant problems which require further audit by this Office or review by the government and Parliament. It is not designed to allow a government-wide conclusion.

Major Findings

17.31 In our opinion, the Office of Privatization and Regulatory Affairs' (OPRA) 1986 administrative procedures for developing regulations identifies and supports essential principles of public sector accountability. Notably these principles include requirements for:

• clear ministerial and public servant accountability;
• early and extensive public consultation;
• reliable impact assessments;
• full public disclosure of information, including information provided to Cabinet, to interested parties; and,
• effectiveness evaluation.

17.32 It is especially noteworthy that the government's policy imposes an obligation on departments to disclose key information rather than requiring interested parties to search for it.

17.33 In adopting this administrative policy for regulations, the government has not only set out principles of accountability but also the criteria against which the performance of departments can be assessed. In this regard the approach is a model framework for public sector accountability.

17.34 Our overall conclusions on the extent to which the branches of the four departments we audited comply with these procedures are reported below.

17.35 Accountability for processing regulations is, for the most part, clear. Improvements are, however, needed in some of the departments in documenting roles and responsibilities of officials, specifying clear development milestones and tracking the status of regulations against the milestones.

17.36 Consultation policies are generally satisfactory, but the actual process of consultation is not always adequate. We found instances where interested parties were given ample opportunity to comment on proposed regulations. However, we also found situations where opportunities for consultation were unequal and inconsistent prior to publication of the proposed regulation in Part I of the Canada Gazette. In such cases, the views of commercial interests tended to be solicited earlier and more actively than those of "public interest" groups.

17.37 Impact assessments of proposed regulations need to be strengthened. The regulatory policy emphasizes the need for departments to identify and assess practical alternatives to regulation, for example, self-regulation. It also requires an examination of such options as various degrees of formal regulation, for example, different levels of control over emissions of pollutants. We found that assessments of alternatives to regulation were not always conducted and that assessments of proposed regulations sometimes did not include comparisons to other regulatory options. This approach reduces the usefulness of the analyses by not providing for the comparison of a proposed regulation with other practical regulatory and non-regulatory alternatives.

17.38 Comparability of impact assessments between departments is made difficult by the inclusion of different benefits and costs in departmental studies. One department included monetary estimates of the value of lives saved by regulations while others chose not to use such an estimate. Another department did not include estimates of commercial benefits to private sector firms or costs to the government where they were material. A lack of a consistent approach can make some regulations appear to have much higher benefits or costs than others. A lack of comparability increases the difficulty of efficiently allocating resources to implement and enforce regulations.

17.39 These problems resulted partly from inadequate technical guidance from OPRA in the initial stages of implementation of the policy. In March 1989, OPRA issued a draft Guide to Regulatory Impact Analysis, which, in our opinion, represents state-of-the-art benefit and cost assessment. If this guide is followed by departments, a major improvement in the quality of analysis of proposed regulations can be expected.

17.40 Major improvements are needed in reporting information to the public on the impacts of regulations. We found that the departments we examined did not always report the required key information on proposed regulations in the RIAS. Unreported information has included important changes in regulations, significant commercial benefits to private sector firms, costs to the government and legislative authority issues.

17.41 Reporting of information on the use of alternatives to regulation is not required in the RIAS and in the annual Regulatory Plan. OPRA's process for developing regulations encourages departments to examine alternatives to proposed regulation that could achieve the same objective. However, departments are not required to report, either in the RIAS or the annual Regulatory Plan, the use of an alternative and its impacts. Interested parties may therefore be unaware of departmental action intended to achieve the same objectives as regulation.

17.42 Information in the annual Federal Regulatory Plan on departmental proposals to regulate can be improved. The annual Federal Regulatory Plan is a key means of making interested parties aware of proposed regulations. We found that some of the departments did not provide all the information required in the Plan, for example, the names of specific regulations to be revised, and basic information on anticipated impacts.

17.43 Furthermore, we noted that the information in the Plan does not allow interested parties to track the development of proposed regulations. The dates given in the Plan for publication in the Canada Gazette are often not met. The Plan does not provide interested parties with information that enables them to know the status of a proposal and the length of time it has been in development. In addition, where a proposal is not repeated in subsequent annual Plans, the reader cannot tell whether the proposal has been completed or dropped, or whether an alternative to regulation has been chosen.

17.44 Improvements are needed in the evaluation of regulatory programs in the departmental branches we audited. All four departments had plans for evaluating the regulatory programs we reviewed. Only one department had conducted and finalized program evaluations of regulatory programs. One of its two evaluations was satisfactory. Although another department had an evaluation planned for 1991, we found no evidence that the needed data had been developed. The 1982 evaluation of the same program also was hampered by the same lack of data.

17.45 Enabling legislation may lack provisions that allow departments to consider a range of regulatory options. Consideration of a full range of practical regulatory options may be constrained by an absence of legislative authority for a number of these options. For example, one department reported in its RIAS that a particular regulation limited production of ozone depleting chemicals to essentially two producers. The RIAS also indicated that this limitation may lead to price increases resulting in the transfer of hundreds of millions of dollars from about one thousand users to essentially the two producers of the product. The department could not obtain any benefits to taxpayers from the transfer of money resulting from its regulation through such measures as charging fees or auctioning off production rights. It stated that it did not have the statutory authority to undertake such options.

17.46 In our opinion, the scrutiny of regulations by the Standing Joint Committee is essential to maintaining parliamentary control over the regulation powers delegated to the government by Parliament. The work of the SJC focuses primarily on whether or not there is legislative authority for a regulation. For example, one of the Committee's major concerns is whether regulations provide discretionary authority to ministers and others outside of the powers specified in the legislation. We found instances where the legislative authority for a regulation continues to be debated or a satisfactory solution was not implemented after many years of exchanges between the SJC and departments.

Recommendations

17.47 Departments should comply fully with OPRA's procedures for developing regulations. In particular, complete information on the impacts of regulations and any material rule changes should be reported.

17.48 OPRA's procedures should be extended to require departments to report the use and expected impacts of alternatives to regulation.

17.49 The annual Federal Regulatory Plan should contain information allowing interested parties to track the status of proposed regulations from year to year.

17.50 OPRA should strengthen its challenge and review procedures by selectively conducting in-depth reviews of information departments are required to provide in the RIAS and in the annual Regulatory Plan, to ensure that it is complete, reliable and comparable in the assessment of benefits and costs.

17.51 Departments should improve identification of the range of likely regulatory options for which they may need statutory authority so that legislation can be revised to remove constraints to desirable regulatory actions.

17.52 The Standing Joint Committee should consider extending its review to elements of the regulatory impact assessment statements. For example, it could review on a selective basis, the completeness of information in the RIAS relating to consultation and impacts. The SJC should also consider presenting periodic reports to Parliament summarizing the major issues of government-wide regulatory authority it has raised and the extent to which major concerns remain unresolved between particular departments and the Committee.

The Four Branches

Environmental Protection Directorate, Conservation and Protection, Environment Canada

17.53 The Environmental Protection Directorate (EP) of Conservation & Protection, Environment Canada, has primary responsibility for federal government efforts to control toxic chemicals and pollution, including the administration of the Canadian Environmental Protection Act and Section 33 of the Fisheries Act.

17.54 EP operates in complex circumstances involving the reconciliation of environmental protection requirements, industrial interests, socio-economic impacts, public pressures and federal-provincial jurisdictions.

17.55 We found strong support within Conservation & Protection for increasing openness, consultation and technical proficiency.

17.56 Accountability. In our view, Environmental Protection's procedures for setting priorities are satisfactory. A Priority Substances Panel, composed of scientists and representatives of industry, labour and environmental groups, recently proposed the Priority Substances List which was approved by the responsible Minister. This list of toxic substances will guide the Department's regulatory agenda for the next five years.

17.57 Although senior officials' accountability for regulations is clear, EP policies identifying roles and responsibilities at the working level for various aspects of the regulatory process have not been clarified.

17.58 Disclosure of plans to regulate. EP's activities are not always reflected in the Regulatory Plan. For example, EP has consulted extensively with certain interested groups in the last two years to revise the pulp and paper effluent regulations. The intention to regulate in this area was reported in the 1987 plan, but was not included in the plans for 1988 and 1989.

17.59 Consultation. In our opinion, EP has developed a model process for establishing a consensus on environmental protection measures among a diversity of groups. One objective of the process is to bring together all concerned parties or "stakeholders", to promote a common understanding of the issues. It is clearly described in the Environment Canada publication "From Cradle to Grave: A Management Approach to Chemicals". The process was successfully used to develop the Canadian Environmental Protection Act (CEPA) and the proposed amendments to the Environmental Contaminants Act.

17.60 However, EP has not extended this process to developing specific regulations that implement CEPA. Consultation on regulations is not guided by policies on how consultation should be structured, the type of information to be disseminated, the rang of groups to be consulted and the records of consultation to be kept.

17.61 As a consequence we found evidence of inconsistent and unequal opportunities for consultation on regulations in EP as well as inadequate disclosure of information. We noted that EP tended to actively solicit the views of industry or technical advisers earlier than those of other groups, if not exclusively.

• During the last two years, industry and the provinces were consulted extensively on possible revisions to the pulp and paper effluent regulations. This consultation occurred prior to publication of the notice of intent to regulate in Part I of the Canada Gazette on 1 April 1989. Environmental groups had not had any significant involvement prior to this notice. EP explained to us that consultation with environmental groups and other interested parties has been initiated and that a discussion paper describing the proposed amendments will soon be made public.
• Results of a departmental study, indicating lack of compliance by the pulp and paper industry with effluent control regulations, were not made available to all concerned parties.
• On 21 June 1986 it was announced in the Canada Gazette that EP intended that leaded gasoline would be eliminated by 1992. Environmental, health and industry groups had the opportunity to make known their views about the 1992 cut-off date. After the announcement, environmental and health groups did not have a full opportunity to consult on the specific nature of the regulation. Industry, however, was consulted on such issues as how the regulation would be applied and enforced, the need for lead in specialized uses and when and where lead content would be measured.
• In contrast to the leaded gasoline regulations, public consultation on Phase One of the regulations to control chemicals that endanger atmospheric ozone levels was extensive with regard to certain control options.
• The proposal to amend the vinyl chloride regulations was announced in 1988. The revisions deal with measures to contain and report on releases of vinyl chloride into the atmosphere. EP documentation indicates that during the summer of 1988 their staff carried out a complete consultation with industry and the provinces involved concerning such issues as malfunction and emission trends reporting and accident prevention and preparedness. Our audit found that consultation with public interest groups had not taken place and that the final proposed amendments had been prepared by departmental officials. EP explained to us that the consultation process has not yet been completed and that it intends to carry out consultations with public interest groups prior to publishing the regulation in Part 1 of the Canada Gazette.
• Revisions to the Asbestos Mining and Secondary Lead Smelter regulations were not indicated in the RIAS approved by OPRA in July 1988 nor in 1989 when the RIAS for Asbestos Mining Regulations was published. The revisions included removing the requirement for an inspector to be present at all pollution tests ordered by the Minister, and adding a provision to allow the department to change the method of testing pollution emissions without changing the regulation.

Departmental response: Regarding our observation on inconsistent and unequal opportunities for consultation, EP states:

It is recognized that there is room for improvement in consulting with non-governmental organizations. It is nevertheless of utmost importance to consult industry promptly and in-depth on scientific and technical aspects to ensure that feasible and effective regulations are created.

17.62 Cost and Benefit Assessment. Environmental Protection satisfactorily identifies regulatory options. Also generally satisfactory were its cost-benefit analysis of proposed ozone regulations, the information provided to Cabinet and Parliament on Ocean Dumping regulations, the information describing the compliance monitoring procedures for ozone depleting chemicals, and EP's guide on socio-economic analysis of pollution control.

17.63 At the same time, we found certain deficiencies. For example:

• Proposed ozone protection regulations would effectively restrict production of certain ozone depleting chemicals to essentially two Canadian producers. EP's studies, not widely circulated during public consultation, indicate that implementing the regulations may result in the transfer of $237 million to $348 million from 1,000 users of the chemical to essentially two producers. Alternatives which would obtain direct benefits for Canadian taxpayers, such as charging fees, or auctioning off production rights or combining quotas with the right of transfer, were identified, but in our view not adequately considered. EP explained to us that they do not believe they have the legislative authority to implement these alternatives because they were not provided for in the enabling legislation. EP indicated that given the Department's increasing public profile, senior officials are seeking solutions to the problem of limited authority in discussions with central agencies.
• Proposed gasoline regulations will phase out the general use of lead in gasoline by December 1990, rather than in 1992 as originally planned. The regulations will permit the use of leaded gasoline for critical and specialized uses in agriculture, marine activities and transportation. The rationale for an accelerated phasing-out of leaded gasoline is the harm lead causes to health. We did not find an assessment in the RIAS of the health consequences of continuing to permit certain uses.
• The impact of revisions to regulations controlling pollution from secondary lead smelters and asbestos mines was not assessed in the accompanying RIAS's.

17.64 Evaluation. The intent to evaluate specific regulatory programs was disclosed in the 1988 and 1989 Regulatory Plan. In March 1989, a revised draft five year program evaluation plan was prepared which includes CEPA programs.

17.65 Environment Canada has already completed two evaluation studies of three Environmental Protection programs.

17.66 We found that the evaluation of the industrial effluent and commercial toxic chemical control programs was not satisfactory. For example, data were inadequate on compliance with existing regulations. The evaluation of the Ocean Dumping Regulatory Program was satisfactory. The evaluation's scope and findings addressed key issues of effectiveness. For example, it found that "very little monitoring of Canadian disposal sites has been done and, as a consequence, there is no way of knowing whether or not an adverse impact has occurred".

Canadian Coast Guard, Transport Canada

17.67 The Marine Regulatory process is part of the Canadian Coast Guard activity in Transport Canada. Its overall objectives include developing and implementing regulations that contribute to marine safety and environmental protection.

17.68 Accountability. The Canadian Coast Guard has established a Legislative Affairs Review Council that includes key officials and is responsible for setting priorities and reviewing regulatory activity. Branch heads are regularly informed of the status of regulations.

17.69 Reporting of Plans to Regulate. In one third of the sample of regulations we examined, the information in the RIAS on the anticipated impact of the proposed regulations of Canadian Coast Guard was incomplete. For example, as explained below, information provided on the proposed Arctic shipping pollution regulations did not report anticipated commercial benefits to oil companies from extending the shipping season.

17.70 Consultation. The Canadian Coast Guard has established the Canadian Marine Advisory Council as the principal instrument of consultation. Representatives from industry and labour attend Council meetings. Provinces, municipal governments, industry and other interests are involved from the start of the regulatory process.

17.71 Cost and Benefits Assessment. We reviewed eight Canadian Coast Guard regulations. Cost benefit analyses had been conducted in five of the six instances requiring them. The methodology used in the cost benefit analyses could be improved. The information provided was incomplete in certain key areas. For example:

• Proposed pollution prevention regulations are designed to increase protection of the marine environment from oil discharges by ships and to allow Canada to accede to the Marine Pollution Convention. The RIAS submitted to RAB does not report that an uncertainty exists as to whether there may be additional reception facilities needed for ships to discharge bilge and, if they are required, whether the government or the private sector would pay for them. The Department informs us that a study is underway to determine whether or not additional facilities are required.

Arctic shipping pollution prevention regulations: an example of incomplete reporting of information

17.72 The 1988 Regulatory Plan included proposed amendments to extend the marine navigation season in certain Arctic Zones. On 1 February, 1988 DOT requested that Cabinet exempt the proposed regulations from normal prepublication in Part I of the Canada Gazette, on the grounds that it was an urgent, minor and routine amendment affecting only a small number of commercial vessels. The exemption was granted and the amendments were approved by Cabinet on 12 May 1988.

17.73 When the RIAS was drafted, a legal debate was in progress over the interpretation of the powers already granted to the Pollution Prevention Officers under section 15(3)(c) of the Arctic Waters Pollution Prevention Act, which could have made the amendment unnecessary. The RIAS did not report this fact. Our review also indicates that the information provided for Ministers on the regulations did not report the costs to the government and commercial benefits to the private sector. Further, no public consultation took place on these regulatory amendments.

17.74 On 2 September 1987 Oil Company A requested an extension of the navigation season to allow a certain type of ship in an area of the Arctic during a time period when the area is normally closed to such ships because of ice and other weather conditions. Although this extension was requested by the company to support its drilling program, the reason provided to the public for this extension was that "failure to implement these measures could result in increased damage to the environment in the event of an environmental emergency". The commercial benefits to Company A were not reported in the RIAS.

17.75 On November 4, 1987 Oil Company B requested an amendment to permit the M.V. Arctic, an experimental ship, to navigate in another Arctic Zone during a restricted season in 1988. The Company requested this extension to increase the amount of crude oil that it could remove. We found that the Department did not report the commercial benefits that would accrue to Company B resulting from this regulatory action. The regulation requires that a Coast Guard icebreaker be available to assist the ship before the ship can proceed. The cost to the taxpayer of such assistance also was not reported.

17.76 Evaluation. Transport Canada plans to complete its evaluation of the Marine Environment Protection and Clean-up Function, including related marine regulations in July 1989. The intent to evaluate was publicly reported.

Department's response: Noting the effective date of September, 1986, for the new Federal Regulatory Action Plan, with respect to the drafting of Regulatory Impact Analysis Statements (RIAS) documents, the Department's regulatory initiatives that were the subject of the Auditor General's compliance audit were prepared in a complex transitional environment and finalized under the new guidelines.

The Department is committed to the principles of openness, fairness, efficiency and accountability in the federal regulatory process and will comply with the intent of the new regulatory policy.

Bureau of Radiation and Medical Devices, Health and Welfare Canada

17.77 The Bureau of Radiation and Medical Devices (BRMD) is part of the Environmental Health Directorate (EHD), Health Protection Branch, Health and Welfare Canada. The Bureau's responsibilities include the developing of standards and regulations to reduce health hazards associated with medical devices and radiation sources. In 1989-90 the Bureau plans to improve the speed and efficiency of standards development by making direct reference in regulations to national and international consensus standards.

17.78 Accountability. A bi-weekly report on the latest status of proposed regulations is prepared by EHD. The report does not compare the current status with planned targets or explain problems being encountered such as delays.

17.79 The development of major policies governing the use of concensus standards as an alternative to regulation is unco-ordinated.

17.80 Disclosure of plans to regulate. The Environmental Health Directorate is significantly behind schedule in completing its regulatory actions. Excluding minor housekeeping amendments, we found that for 1989, EHD planned 24 regulatory actions, including 8 from the 1987 Plan and 9 from the 1988 Plan. The three regulations we reviewed had a 10 to 11 year development period. We found that interested parties had not been informed about the status of proposed regulations. Moreover, we are concerned that delays in the development of regulated safe performance standards may constitute a risk to the safety and health of medical device users. HPB indicates that "a delay in the establishment of a standard does not necessarily mean that enforcement action cannot be taken. The Food and Drugs Act itself can usually be applied if there is a risk to the health of the user".

17.81 Consultation. The Bureau of Radiation and Medical Devices has established an Advisory Committee on Medical Devices composed of representatives of various medical specialties. The Minutes of the Committee and its Sub-Committee on Medical Device Guidelines and Standards are sometimes inadequate on key issues. For example, they did not include the Sub-Committee's conclusions on draft criteria for voluntary standards to be adopted as regulations.

17.82 Disclosure of information on alternatives to regulation. As a result of regulatory reform, EHD may issue guidelines in lieu of formal regulations. EHD indicates that the decision to use a guideline as an alternative to regulation would be disclosed in the Annual Regulatory Plan as has been its past practice. The guidelines would be distributed to industry and interested parties by Information Letter.

17.83 Departments are only required to disclose formal regulatory proposals in the annual Federal Regulatory Plan. In our opinion, EHD's practice is more consistent with the principles of the regulatory process.

17.84 Evaluation. An evaluation of the Medical Devices program in the Environmental Health Directorate was to be completed in March 1990, but because of other priorities has been deferred to 1991. The last evaluation of the Medical Devices program, in 1982, encountered a lack of adequate data on device related hazards and injuries. We did not find evidence that the needed data had been developed for the upcoming evaluation.

Occupational Safety and Health, Labour Canada

17.85 The Occupational Safety and Health Branch (OSH) of Labour Canada is responsible for the administration of occupational safety and health programs. Its main work is the implementation of the provision of the Canada Labour Code which applies to companies under federal jurisdiction, for example, grain, banking and broadcasting. Approximately 34,000 entities with about 900,000 employees are covered, including all federal public servants.

17.86 Accountability. OSH has a clear definition of roles and responsibilities for the regulatory process. A detailed description of the process matches roles and responsibilities of officials against each stage of the regulatory process.

17.87 Disclosure of plans to regulate. The 1988 and 1989 Regulatory Plans refer to proposed revisions to a set of regulations. The specific regulations to be revised are not mentioned in either year. However, priority regulations for revisions were identified within OSH in 1986.

17.88 Consultation. OSH has implemented a satisfactory system for consultation on regulations and for setting priorities. At the centre of the system is a Review Committee chaired by Labour Canada and composed of labour and industry representatives. We found that both industry and labour are given ample opportunity to express their views in position papers and regular meetings.

17.89 Cost and benefit assessment. OSH conducts a cost and benefit assessment only of the regulatory option recommended by the representatives of labour and industry on the Review Committee, after lengthy negotiations. OSH states that it believes this procedure complements its compliance policy and is consistent with the government's regulatory review process. In our opinion, assessing only the chosen option reduces the usefulness of the analyses to the Review Committee, since other options cannot be compared to the chosen option.

17.90 In the two studies reviewed we found that there was room for a greater degree of technical rigour. OSH indicated that the level of analysis was limited by time pressures, data availability, resources and varying direction on methodology from central agencies.

17.91 We also noted that in its benefit and cost assessments of its regulations OSH does not estimate the monetary benefits of saving lives. OSH explained to us that it believes that its practice is consistent with OPRA procedures.

17.92 Evaluation. Labour Canada has an approved evaluation plan. The evaluation of OSH programs is in the beginning stages. The intention to conduct program evaluations has not been published in the Federal Regulatory Plan as required.

The Standing Joint Committee of the Senate and of the House of Commons for the Scrutiny of Regulations (SJC)

17.93 The Joint Committee for the Scrutiny of Regulations is a Committee of Parliament composed of members of the House of Commons and the Senate. Its role is to scrutinize regulations made by the Executive to ensure that they are authorized by legislation and conform to the requirements of the Statutory Instruments Act.

17.94 The SJC's scrutiny criteria include, for example, whether a regulation:

• is not authorized by the terms of the enabling legislation or has not complied with any condition set forth in the legislation;
• is not in conformity with the Canadian Charter of Rights and Freedoms or the Canadian Bill of Rights;
• imposes a fine, imprisonment or other penalty without express authority having been provided for in the enabling legislation;
• makes the rights and liberties of the person unduly dependent on administrative discretion or is not consistent with the rules of natural justice; and
• amounts to an exercise of substantive legislative power properly the subject of direct parliamentary enactment.

17.95 If the SJC believes there is an absence of legislative authority for a regulation, it normally writes to the department responsible for the regulation asking for corrective action. The department may agree or disagree with the Committee's views. We found that in certain instances exchanges between the Committee and a department have continued for many years.

17.96 During our special audit of the regulatory process we noted the matters raised by the SJC with the branches of the audited departments. SJC frequently raises important questions about the absence of legislative authority for departmental regulations. Some of the more important examples are described below.

17.97 The SJC informed Environmental Protection on 16 December 1977 and 17 March 1978 that its effluent regulations, under Section 33 of the Fisheries Act delegating ad hoc discretion to the Minister, are outside the Department's legislative authority. The matter remains unresolved after many years of exchanges between the Department and SJC.

17.98 The SJC informed Transport Canada on 11 June 1984 that it was of the opinion that Transport Canada did not have the authority to allow dangerous goods to be packed, marked, stowed or carried according to standards "equivalent" to those specified in the regulations. The Committee believed that such substitution must be specifically authorized in the enabling legislation. Concerns about this matter had initially been raised by the SJC in early 1982. In 1987 the Committee continued to note that while the Department cited various enabling authorities for the equivalency provision, the Committee did not agree that the cited authorities were appropriate. The Department believes that amendments to the 1987 Canada Shipping Act provide the authority. In November 1988, the SJC and the Department resolved the matter.

17.99 The SJC informed Health and Welfare Canada on 10 February 1975 that the Department's 1972 regulations had improperly delegated power to the Minister under a certain section of the Narcotic Control Act, managed by the Drugs Directorate, Health Protection Branch. Extensive correspondence ensued between the Committee and the Department. On 14 June 1988, the Minister informed the Committee that he intended to introduce legislation to rectify this and other issues. The legislation had not been introduced at time of writing.

17.100 In March 1985, the SJC wrote to Labour Canada regarding the Coal Mine Safety Regulations affecting the Cape Breton Coal Mines. SJC indicated that the Coal Mines Safety Officer's discretionary powers to vary or exempt the application of a regulation, or to approve mining methods, equipment or procedures, were not consistent with the Canada Labour Code. The powers were used to ensure that the standards applying to coal mining operations were appropriate to the changing mining environment.

17.101 Labour Canada sought amendments to the Code to provide clearer authority. These came into force in March 1986. According to Labour Canada the amendments caused serious problems for all parties concerned. After consultation, Labour Canada decided in February 1987 to again amend the Code, to establish a Commission with the authority to vary the application of regulations. Labour Canada assigned a high priority to these amendments. In 1988 the Code was further amended to enlarge the regulation making powers of Cabinet. The amendments also retroactively clarified the authority for the Coal Mines Regulations. As a result of the 1988 amendments, Labour Canada is revising its existing regulations. However, due to other government priorities, processing of the regulations was delayed. As of writing this process is not yet completed.

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July 26, 1989

Mr. Kenneth M. Dye

Auditor General of Canada
240 Sparks Street
Ottawa, Ontario
K1A 0G6

Dear Mr. Dye:

The Office of Privatization and Regulatory Affairs appreciates the special audit of the new federal regulatory process carried out by the Auditor General's Office. This review is timely and a welcome recognition of the importance to good government of efficient and effective regulatory management.

As an innovative and ground-breaking initiative for which there were no precedents anywhere in the world, it is perhaps not surprising that there have been some shortcomings and individual lapses during the early start-up phase of the program. Identification of the overall positive results of the program is gratifying and steps will be taken to address the difficulties brought out by your auditors.

Thank you for the opportunity to review and comment on the parts of the draft audit report which affect this department.

Yours sincerely,

Janet R. Smith