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1993 Report of the Auditor General of Canada

Assistant Auditor General: Paul Ward
Responsible Auditor: Hugh McRoberts

Main Points

13.1 The Agri-Food Policy Review left the Department of Agriculture with a formidable agenda of policy changes that it and its partners are now in the process of translating into action. Expectations arising from the review were high; but there are many stakeholders and, often, these stakeholders have divergent views on the complex issues involved.

13.2 Although the Department has been active and much of the early work has been accomplished in response to the Agri-Food Policy Review, in many areas the changes have been to departmental infrastructure; for example, the Agri-Food Competitiveness Division was created and studies such as the continued development of a competitiveness framework were undertaken. Consequently, change is not always visible to external observers.

13.3 The Department believes that the successful implementation of the Agri-Food Policy Review depends in part on a series of changes in culture affecting the relationships and expectations of all of the partners in the agri-food sector. There is an important dimension to this change in culture that must occur in the Department, as well. This will be particularly important in developing a working partnership as the Department balances priorities and demands among its economic, social, regional and environmental responsibilities.

13.4 Because the effects of change are not yet appropriately measured in many of the action areas of the Agri-Food Policy Review, such as environmental sustainability, it is difficult for managers to know the effects of their actions, and hence to manage the change.

13.5 There is now a need for the Department to define common concepts and terms for the key areas of policy change, for example "value-added", "market-oriented versus production-oriented" and "marketing strategy". This will affect how the Department communicates with its partners, and its reporting and accountability to Parliament.

13.6 There is a clear expectation that the Department will process and disseminate market information/intelligence that is useful to government and industry, and do so in a manner that ensures a cost-effective use of public funds. Data will need to be analyzed and the results disseminated to interested parties without risk of gaps and duplication. Ensuring that it has the right data, as well as good analytical and dissemination capabilities, is a key challenge facing the Department.

Introduction

13.7 For the Department of Agriculture, 1989 to 1991 was a period of intense policy review. This review occupied much of the time and energy of the partners in the Canadian agri-food sector, including the federal and provincial governments, producers, suppliers, distributors and processors. The objectives of the review were to develop policies and programs that would lead to a more market-oriented, self-reliant and environmentally sustainable agri-food industry in Canada; in so doing, the aim was to develop truly national policies and programs that recognize and respond to regional diversity.

13.8 By 1991, an array of recommendations touching on virtually every aspect of the agri-food sector's infrastructure had been reviewed, and many had been accepted both by the federal ministers of Agriculture and by their provincial counterparts. The challenge then facing the Department of Agriculture and its partners was to develop programs to implement the policy directions established by the ministers, at the same time preserving and enhancing what they considered to be the rich consultative process and sense of partnership they saw as the hallmark of the Agri-Food Policy Review.

13.9 The purpose of this chapter is to report on the progress the Department has made in a number of key areas.

Background

13.10 In the spring of 1989, at a time of continuing national and international crisis in agriculture, the ministers of Agriculture announced that there would be a major review of Canadian agri-food policy. Its objective was to encourage industry responsiveness to domestic and export markets, and self-reliance; at the same time, the review would look at how to preserve the environment and ensure a safe supply of food.

13.11 In November 1989, Canada's three federal ministers of Agriculture published Growing Together: A Vision for Canada's Agri-Food Industry . In this document the ministers established four pillars for agricultural reform, to guide the direction of future programs and as a test against which past and future programs could be assessed. ( see Exhibit 13.1 )

13.12 In December 1989, the Department brought together over 1800 representatives from federal and provincial governments, producers, processors, suppliers and distributors at a national conference in Ottawa. Following two and a half days of discussions, ministers announced a second stage to the policy review process - the formation of 11 task forces or committees comprising representatives from industry, government, academia and farm associations to develop options for policy change for each of the major policy areas.

13.13 For the next 18 months the task forces met, debated and wrote. By 1991, they had completed their work. Their reports had been presented, sometimes more than once, at meetings of federal-provincial ministers; in most cases, their recommendations had been accepted. The Department and its partners then faced the challenge of implementation.

Overall Scope of the Audit

13.14 The purpose of this audit was to examine and report on the Department's progress in implementing the recommendations of the Agri-Food Policy Review. We focussed on those action areas related to:

  • market and trade development,
  • research and technology transfer,
  • environmental sustainability,
  • farm management skills,
  • regulatory review, and
  • pesticides registration review.
13.15 The other directions for change coming out of the Agri-Food Policy Review are also important and contain elements that affect the areas subject to audit. However, we have excluded them as a primary focus of this audit for various reasons: Safety Nets is an area we reported on in 1991 and which we will follow up in 1994; Food Safety and Quality was examined in 1988 and will be the subject of a separate 1994 audit report; and the remaining areas represent subjects where the mandate of the Office and/or the mandate of the Department is less direct, such as Western Grain Transportation. Excluding safety nets, food safety and quality, and western grain transportation activities, the Department of Agriculture's annual expenditures were about $700 million and 6000 person-years during the period under review.

13.16 In addition to auditing progress in each of the action areas cited here, we have developed a number of overall observations on how the Department has responded to the challenge of change presented by the Agri-Food Policy Review.

13.17 We then present our progress reports for each of the action areas. These follow a common format. They begin with a brief presentation of the Agri-Food Policy Review's directives; this is followed by a discussion of the progress that we have observed. Each report concludes with a section headed "Agreed-to next steps". This is in keeping with the nature of our report as a progress audit, and represents an agenda of actions to continue the change that has begun, jointly developed by management and by us, and to which management is prepared to commit. This agenda will be the basis for audit follow-up by our Office and for Parliament in future years.

Criteria

13.18 In this audit we elaborated on our traditional general audit criteria, which are focussed on the need for management with due regard to economy, efficiency and effectiveness, to include specific criteria based on the accepted recommendations of the Agri-Food Policy Review. In each of the action areas, we identified the recommendations that had been made and presented to federal and provincial ministers of Agriculture. We supplemented these with related recommendations arising from other authoritative sources, such as parliamentary committees and the budget. We reviewed these with management to arrive at a list of recommendations that management agreed represented government policy direction. The recommendations used to shape our audit are presented in Annex A.

Overall Observations

The Visibility of Change

13.19 The Agri-Food Policy Review left the Department of Agriculture with a formidable agenda of policy changes that it and its partners are now in the process of translating into action. Within the agri-food sector, the expectations for change arising from the review were high; however, there are many stakeholders and, often, these stakeholders have divergent views on the complex issues involved. The urgent need to maintain the momentum for change will remain a priority throughout this decade.

13.20 When we began our audit we were aware of a growing impatience on the part of many of the individuals and organizations who had played a part in the Agri-Food Policy Review. The impatience was centred around what many felt was the lack of action on the part of the Department following extensive consultations that had taken place over the previous three years. We found that these perceptions were both true and false. We found them to be reasonable observations - notwithstanding the accomplishments of the Department - because many who were consulted could see little public evidence of action on some of the issues on which they had given their advice. We found them to be false in that, in the course of our audit and as reported here, much has changed and is changing, particularly within the Department of Agriculture. Much of this change - such as the creation of the Agri-Food Competitiveness Division and the continued development of a competitiveness framework - is in the departmental infrastructure and is a necessary platform for the more visible changes to come.

13.21 The situation is not unlike that of a large ship that must change course and speed in an emergency. The outside observer may perceive a long lapse between the time the situation becomes apparent and the time something is seen to be happening. This is not because those on the ship are unaware of the problem and doing nothing about it. Far from it. Activity inside the ship is likely to be quite hectic. It just takes a while for that activity to show an externally visible result.

The Challenge of Change in Culture

13.22 "Both levels of government understand that they alone cannot solve the problems and lay the foundation for a solid tomorrow. To make a plan for the next century, a working partnership is needed, a partnership covering all the players: farmers, food processors and distributors, input suppliers and consumers, as well as governments. Together, we can help the industry to grow even stronger.

We believe that we must act now to develop this partnership and to address the problems in our system. If we wait, those problems will prevent us from meeting the challenges and realizing the opportunities for growth in the 1990s and beyond." Growing Together , 1989

13.23 From the inception of the review in 1989, the Department was clear that a significant change - in essence, a change in culture - would have to be made, away from old behaviours, expectations and attitudes to agriculture and agri-food policy. This change in culture would have to march hand in hand with substantive programmatic changes if the Agri-Food Policy Review was to succeed. There were two components to this change in culture: internal and external.

13.24 The external component focussed on the relationship between the Department and the other stakeholders in the agri-food industry. In a very summary way, that change can be seen as proceeding in stages, as the circle of involvement and inclusion is successively broadened. It began with the essentially unilateral policy culture of the post-war decades, in which the two levels of government exercised their concurrent jurisdictions on behalf of producers more or less independently. Then there emerged in the late 1980s a trilateral approach to programs, which brought together the two orders of government and producers in the co-development and management of safety-net programs. This culminated in the development of the Farm Income Protection Act . Next came an extension from trilateralism to multilateralism as the stakeholder base was broadened from agriculture to agri-food to draw in processors, distributors and consumers. The most recent recognition of this element of change is to be found in the new and much broadened range of responsibilities assigned to the Department in the most recent government restructuring.

13.25 A less visible but equally important dimension of change in culture is the need to couple these external changes with an equally profound change in the corporate culture of the Department. For example, the change from a unilateral to a multilateral policy/program environment requires that the departmental officials involved change in very fundamental ways their understanding of their roles and accountabilities. What was appropriate in one environment may be unacceptable in another. Such change is difficult and can take time, particularly when the same people must continue to administer programs and policies.

13.26 As part of this internal change in culture, officials must learn to think more broadly. In the past, the departmental culture has been built around very strong vertically structured branches, each focussing on its own business. Often entire careers would be served out within a single branch. While the professionalism and loyalty in these vertical organizations will continue to be important, responding to the challenges of the Agri-Food Policy Review will increasingly require a more holistic and integrated approach to problems and issues. Concepts such as sustainability and competitiveness cannot succeed if they are seen as the concern of only one or two branches. Rather, they must become pervasive concepts integral to the thinking in all branches. This will be particularly important as the Department balances demands arising out of the economic, social, regional and environmental responsibilities inherent in its new mandate.

13.27 We have observed in the course of our audit that, while the Department has started down the path of change in culture, it has a long journey ahead. At the same time, it is not alone on this path; the industry and the other levels of government must be part of this change and, to some extent, the rate at which they change affects the rate at which the Department can change.

The Measurement of Change

13.28 At the core of Growing Together and the Agri-Food Policy Review was a desire for change - for a more market-oriented, self-reliant, sustainable and competitive agri-food sector. The magnitude of this change is such that it will extend over many years and involve many parties. Generally accepted management practices, in the area of change management, stress the importance of measurement (particularly quantitative measurement). In particular, these practices emphasize the need to develop yardsticks to measure the initial state, and to repeat those measurements at regular intervals in order to track the extent to which programs will effect the desired change.

13.29 During our audit, management repeatedly challenged us to judge them on results rather than on systems. Unfortunately, we were only partially able to do so. We found that management had a lot of information on their inputs to the various areas of desired change, i.e., new calls for workplans related to changed objectives, and setting up new organizations such as the Bureau for Environmental Sustainability and the Agri-Food Competitiveness Council. We found that management was also able to supply us with a lot of information on the outputs of their efforts, for example, new programs such as National Farm Business Management, marketing strategies, regulatory review and Green Plan activities. We also found in most areas that management had not developed the indicators or measurement procedures necessary to determine the precise nature and magnitude of the problems in their areas of responsibility, or to permit them to track the outcomes of their interventions in relation to the objectives of the Agri-Food Policy Review. We observed, however, that in most areas management had action plans in place to develop indicators of effectiveness and to gather the data necessary to measure them. The pursuit of these initiatives to their successful conclusion will be vital to the success of the Agri-Food Policy Review.

The Need for a Common Understanding

13.30 Clear concepts and a shared understanding of what they entail are the building blocks of culture and cultural change. Without such shared understanding by the Department of Agriculture and its partners, it is very difficult to reach consensus on where the culture is going and to let those involved focus their energies on common goals. In the course of our audit we found that there were important differences in how terms such as "value-added", "market-oriented versus production-oriented" and "market strategy" were used in different branches, and sometimes within branches as well. Such a lack of shared meaning on key concepts will, at the very least, impede the pace of change in culture in the Department. Further, if the effectiveness measurement procedures discussed here are to be developed successfully, it will be essential to have clear concepts from which to construct the measures and indicators. At an early stage in the process of the Agri-Food Policy Review, an element of conceptual "fuzziness" may have been necessary to encourage buy-in and to facilitate participation. However, based on our discussions with industry representatives and our observations within the Department, some conceptual sharpening is now necessary. This will also be important to facilitate working with other branches, and with the other partners in the sector, and to communicate plans and progress clearly to Parliament.

Information: A Key Business for the Department of Agriculture

13.31 In addition to the need to develop effectiveness information for internal management, the other partners in the agri-food sector require information and market intelligence from the Department of Agriculture.

13.32 It is clear that one of the unique roles identified for the Department is to serve as a central point for gathering, analyzing, organizing and disseminating market information/intelligence to the other partners in the agri-food sector on agri-food related matters. This ranges from the demand on the part of the provinces and industry that the Department play a strong role in providing market information/intelligence, to the need expressed in the Agri-Food Policy Review on Research and Technology Transfer for an inventory of transferable technologies. However, in the course of our discussions with experts in the agri-food sector, we found that, while the expectation of more and better market information/intelligence from the Department is strongly felt, the demands are also diffuse and unspecific. This situation poses a challenge to the Department. Information systems can be very expensive to develop and maintain. It will be essential that the Department work closely with the potential consumers to ensure that the information in the system, and the ways in which it can be accessed, are consistent with user needs if these expenditures are to be cost-beneficial.

Action Area Reports

Market and Trade Development

13.33 Growing Together identified marketing and trade development as an area in which change was needed. Among the issues raised in this context were the need to identify roles, responsibilities and priorities more clearly, and the need for governments to gather, analyze and disseminate market information/intelligence better.

13.34 The Department has done a number of things to increase trade: for example, federal and provincial ministers have set a target of increasing annual agri-food exports from $13 billion to $20 billion by the year 2000. To this end, the Department has announced the implementation of the Trade Opportunities Strategy to support the sector in improving its trade performance. To encourage market and scientific research, Parliament recently passed legislation permitting industry-wide sales levies to generate the funds to support this work. No industry associations have yet applied to develop such an arrangement under this new program, as no federal-provincial agreements have been signed.

Roles, responsibilities and co-ordination
13.35 The Agri-Food Policy Review began the process of defining roles. Industry was to be the backbone of market development. The Department of Agriculture's role was to help producers organize to solve marketing problems themselves, to become more market-responsive and self-reliant. Specifically this meant promoting ways to improve the export readiness of firms, developing marketing strategies with industry, developing a better market analysis and intelligence capability, and continuing trade negotiations for improved market access.

13.36 Several federal entities play a role in market and trade development for the agri-food sector, as do many provincial departments. Their roles in this area are not clearly defined. The Department is studying federal and provincial roles in export market development. Taking into account both federal and provincial programs, it will identify opportunities for domestic and export market development, and develop options and mechanisms for federal-provincial co-ordination. It will also examine the willingness of provincial agriculture and trade ministries to develop a co-ordinated federal-provincial agri-food trade development program. A final report was expected in late summer 1993.

13.37 The Federal-Provincial Market Development Council, made up of federal and provincial officials responsible for agri-food market development, is to "provide leadership and co-ordination in fostering a competitive oriented Canadian agri-food sector."

13.38 While progress is being made in addressing federal-provincial co-ordination, management cannot be assured there is no overlap, duplication or gap of activity in market and trade development among governments.

13.39 Farm leaders told us they were concerned that insufficient attention had been paid to domestic market development issues. The Department concurs.

Market information/intelligence
13.40 "Collecting market intelligence for use by government and industry often appears wasteful because it is unclear how or whether it is used. Sometimes governments spend considerable resources obtaining information which appears only marginally useful. There are strong indications that the tremendous amount of market information which is currently available needs to be further analyzed and made more relevant to its users. This can be a key role for governments as industry is often unable to undertake the analysis necessary to effectively use market data." Growing Together , 1989

13.41 Information on domestic and export markets is needed by the agri-food sector to make informed production and marketing decisions, and by governments to allow them to make policy and program decisions.

13.42 To make market information/ intelligence relevant and useful, and to ensure a cost-effective application of public funds, it is necessary to determine users' needs before systems are designed and implemented. This should include an analysis of who needs what, for what purposes, how often, via which media, and what cost should be recovered. While a recent program evaluation included a client survey to assess satisfaction with market information/intelligence, a complete assessment of client needs has yet to be done.

13.43 Several federal and provincial departments and agencies, including the Department of Agriculture, provide market information/intelligence. Their sources of information include on-site direct data collection, Statistics Canada, Canadian embassies and trade missions, a variety of domestic and international electronic databases, and direct contact with members of the agri-food sector.

13.44 Once an analysis of user needs is completed it will be necessary to match those market information/intelligence needs with the market information/ intelligence being gathered by the various federal and provincial agencies, to identify where the needed information is being gathered, where gaps exist and where there is duplication. Currently the information necessary to do this is not available.

13.45 Indications are that gaps and duplication exist. There is a gap with respect to data for the processing and distribution elements of the agri-food sector. Leaders in this sector told us that such data are vital to dispelling myths and misconceptions respecting the sector's performance. On the duplication side, for example, beef export data are provided by both the Department of Agriculture and Statistics Canada. Departmental studies have noted significant inconsistencies between them.

13.46 Recently, the Department completed some studies of specific aspects of market information/intelligence, including a program evaluation of the gathering and compilation of statistical reports on market information by the Agri-Food Development Branch and the Food Production and Inspection Branch, and a study of public market opportunity information for agri-food products in export markets. Both reported their findings in the spring of 1993. Here are some of their key findings:

  • Although some analytical work is done, market information/intelligence provided to industry is usually a compilation of statistics on production and prices. Analysis, repackaging and synthesizing of data are not always performed; nor are conclusions, forecasts and market opportunities always identified.
  • Dissemination of market information/intelligence is too slow and fails to meet the industry's needs for timeliness.
  • Problems continue to exist with the quality of market information/intelligence provided to users.
  • Sources of market information/intelligence are fragmented and difficult to access.
These findings echo the concerns raised in 1989.

Measuring performance and establishing priorities
13.47 At present, there are no criteria for allocating resources for market and trade development activities effectively among commodities within the agri-food sector. The sector is characterized by differences in interests among commodities as well as between producer and processor interests. It is critical that the Department identify priorities and measure its progress in these priority areas.

13.48 The importance of shifting resources from lower-priority to higher-priority areas is clearly articulated in Agri-Food Development Branch's Statement of Priorities for 1993-1994. The preliminary results of an ongoing internal audit of Agri-Food Development Branch show the absence of indicators to reallocate resources effectively. Branch officials have informed us that by 1995, mechanisms will be in place to assist them in better determining priorities.

13.49 A framework for analyzing the agri-food sector's competitiveness continues to be developed and applied to several commodity sectors. A holistic approach is being adopted that takes into account the needs of producers, processors, distributors and consumers. Considerable consultation with government and industry is taking place to ensure an accurate understanding of the dynamics of each sector.

13.50 Extensive data exist for analytical purposes for bulk commodities such as grains and cattle. Some of these data come from the recently developed Farm Level Data Base. However, problems exist in measuring the competitiveness of the processing and distributor elements of the agri-food sector. At present, processing-sector measurement data are too aggregated and out-of-date to be of much value for policy analysis and decision making. A preliminary needs analysis undertaken by the Department points to these limitations and has resulted in departmental officials meeting with Statistics Canada officials to develop new data sources. Without timely and disaggregated data, it will be difficult - if not impossible - to conduct useful and relevant assessments of competitiveness.

Market strategies
13.51 Subsequent to Growing Together , the Department of Agriculture has developed a variety of marketing strategies that provide analytical data along commodity and geographic lines. Generally speaking, they are prepared in consultation with the affected industry groups and other government departments, and take into account both domestic and export considerations. They include commodity strategies, industry strategies, agri-food export market strategies, trade missions and regional development strategies. In our view, the links among these strategies are not clear. There is the expectation that strategies, by definition, provide guidance for action. Given the wide variety, timing and availability of strategies, as illustrated in Exhibit 13.2 , it is hard to see how the Department can act in unison internally or with its partners.

Agreed-to next steps include the following:
13.52 A formal assessment of all market and trade development programs and activities will be undertaken.

13.53 The Department of Agriculture will continue to define more clearly its role and responsibilities vis-à-vis other federal departments/agencies and provincial governments, and to identify possible gaps and areas of overlap.

13.54 The Department recognizes that a gap in its focus on market and trade development exists in the area of domestic market development, and will extend its planning to take this into account.

13.55 The Department will continue to develop mechanisms in order to establish priorities among programs and activities, to develop short- and medium-term goals to meet objectives, and to permit tracking of their progress.

13.56 The Department acknowledges that improvements to the availability, timeliness and quality of data for the processing and distribution elements of the agri-food sector are required. A more comprehensive client-needs assessment of the market information/intelligence required by the agri-food sector and by governments to enhance market and trade development will be done.

13.57 As part of the needs assessment, continuing problems in the usefulness and accessibility of market information/intelligence will be addressed. An action plan with assigned accountabilities will then be developed.

13.58 The Department will define more fully "market strategies"; it will then review its and its partners' future market strategies with respect to completeness of commodities covered, clarification of objectives, establishing priorities, and ensuring co-ordination and consistency of format.

Research and Technology Transfer

13.59 Growing Together identified research and technology transfer as critical to the successful marketing of agri-food products, and to increasing the amount of value-added production in the agri-food industry. The report indicated three areas where greater emphasis was needed:

  • targeting research to place a greater emphasis on market-oriented research as distinct from farm production-oriented research;
  • encouraging industry to adopt new technologies at a quicker pace and to conduct more of its own research and development; and
  • engaging in more research in support of value-added production.
13.60 In 1991-92, Research Branch expenditures approximated $270 million and 3100 person-years.

Targeting research to enhance competitiveness
13.61 Early in the Agri-Food Policy Review the Research Branch defined its mission this way:

"To improve the long-term competitiveness of the Canadian agri-food sector through the development and transfer of innovative technologies."
13.62 One of the key challenges facing Branch management is to reshape the research portfolio in line with its mission and to place a greater emphasis on the types of research noted above.

13.63 Beginning in the fall of 1991, Research Branch gave its scientists clear direction to target research efforts to foster competitiveness and to establish research priorities that will lead to competitiveness. The intent is to screen out research proposals that do not meet these Branch priorities.

13.64 We looked at how the Research Branch would determine how its research program had been affected as a result of this directive. In the Branch, the substantive decision to continue existing research and, more important in this context, to initiate new research is delegated to the regional directors general of research. They in turn delegate approval authority to the directors of the 25 research stations. The delegation at each level is subject to review and override at the higher levels.

13.65 In its 1993-94 Business Plan, the Branch states that in its overall research portfolio "...accountability is reflected through three processes: audits and evaluations, station reviews, and annual reports." Site visits to the research stations by Branch management and periodic variance reports supplement these processes. In our view, while these are valuable sources of information for management, they are - with the exception of site visits - periodic in nature and, in the case of evaluations and reviews, will take many years to complete. They need to be supplemented by an improved management information system that comprises the elements described below.

13.66 We also looked at the Department's scientific management information system. In a Branch with such a highly decentralized decision-making system, we would have expected a strong information system to enable Branch management to monitor the composition of the research portfolio in terms of the extent to which it reflects existing and new priorities. Such information is essential if Branch managers are to be accountable for using the decision-making authority delegated to them.

13.67 The Research Study Data Base has information on over 800 active research projects. While the database contains extensive information on individual research projects, it is difficult to determine from this information how projects support the objectives of the Department and foster competitiveness in the agri-food sector. In our view, this is likely due to the definition and usage of key terms in the database, which was designed to describe what a project does rather than how it contributes to competitiveness. The Branch plans to add the data necessary to assess how projects contribute to competitiveness, and a new benefit/cost model is being developed. This will become part of the new Executive Management Information System that, according to the Department, is being developed to ensure that its research enhances competitiveness and ensures managerial accountability.

Encouraging the involvement of industry
13.68 Encouraging significantly greater industry investment in agri-food research was an important objective identified in the Agri-Food Policy Review. The Department has pursued two directions to that end.

13.69 First, Research Branch has defined its role as focussing on research that has economic or environmental significance for the sector, but that likely has less potential for an early return on investment. The Branch hopes that the private sector will support more of the shorter-term, adaptive, problem-solving research.

13.70 Second, the Branch has decided to encourage private sector involvement by entering into more joint research ventures with industry. According to the Branch, there were constraints on the extent to which the private sector could participate in the fruits of collaboration. The Department therefore negotiated an agreement with Treasury Board to increase the profit-sharing potential.

13.71 Branch officials believe that the number of joint ventures with the private sector and its total investment in such ventures have increased substantially since 1989. Due to changing reporting methods used by the Branch in the last four years, it is difficult to precisely quantify the actual amount of change.

Technology transfer
13.72 Growing Together stated that technological advances will be critical if the agri-food industry is to compete effectively at home and abroad. In 1991, Research Branch asserted that, "in a more market-driven climate, the Branch's ability to transfer knowledge and technology to the private sector will become the yardstick by which its performance is measured."

13.73 The Department is only one player in the technology transfer game. The successful movement of technology requires the co-operation of others, including the provinces and the agri-food industry. Because the Department is possibly the largest single generator of transferable agri-food technology in Canada, there are certain tasks that it must perform particularly well.

13.74 First, the Department must be able to recognize, capture and protect its transferable technologies. To do this requires a clear understanding of the priorities and needs of the potential users.

13.75 Second, during the planning phase of new research, the potential for the creation of transferable technology must be assessed and, where the potential exists, a transfer plan must be developed as part of the proposal.

13.76 Third, a database of technology that can be transferred to the agri-food sector needs to be developed. This is important for several reasons:

  • With respect to planning, technology transfer priorities must be set. This is particularly important in three areas:
    • the identification of potentially transferable technologies that need further development work "on the bench" before they are transferable or protectable;
    • the early identification of transferable technologies that should be protected both to ensure that the Crown's interests are safeguarded and to enhance their attractiveness to industry; and
    • the targeting of those transferable technologies that require management's attention to market their potential to industry or other users.
  • The expressed needs of the Department's technology transfer partners must be met to achieve a common technical base and a means of sharing, modifying and updating that knowledge as required.
13.77 Since the Agri-Food Policy Review the Branch has taken a number of steps to enhance its technology transfer capability, and it continues to be the centre of considerable technology transfer activity. For example, in response to the perception held by the agri-food community that there is research sitting on the shelf that could be used to achieve greater competitiveness, the Department began:

  • a review "to take a broad look at technology transfer by province, looking at approaches, costs and quality of services, and the relationship with the research centres as well as with the other branches of Agriculture Canada";
  • a study to identify alternative approaches to the transfer of technology; and
  • a study of the dairy and spring wheat sectors to determine how successful technology transfers have occurred.
13.78 The Department does not have in place a system to monitor the use of the technologies it has developed and transferred, with the exception of tracking the usage of new seed varieties. Without an effective monitoring system, it is not possible to determine how successful the Department has been in improving the adoption of technology by Canadian producers and processors.

Rewarding change
13.79 We examined how the Branch rewards personnel who respond to the changes in direction called for in Growing Together . Matching rewards with expected change is critical for the Department in demonstrating the commitment of senior management to change.

13.80 We reviewed the Branch's most recent promotions for the research scientist group. Our examination of the criteria for promotion showed that changes in research focus, encouraging private sector investment, and performing technology transfer activities have been used as bases for promotion. However, in keeping with government selection standards, scientific publications and international recognition continue to be the primary criteria for promotion.

Agreed-to next steps include the following:
13.81 The Department is taking steps to strengthen the accountability process between scientific decision-makers and senior management with respect to making project-initiation decisions and changing the nature of the research portfolio.

13.82 The Department will continue to strengthen the scientific management information system, focussing on adding competitiveness information to support the accountability process.

13.83 The Department will implement a technology database as a platform for supporting both management's needs for planning and monitoring information, and industry's needs for current and comprehensive information on the availability of new knowledge.

13.84 The Department will require that research proposals include a technology transfer plan.

13.85 The Department will evaluate key technology transfer activities - including industry infrastructure - by commodity sector to target the most effective methods of technology transfer; the evaluations will include an analysis of technologies that have already been transferred and those not yet transferred.

13.86 The Department will conduct a periodic review of technologies to determine whether commercial interest has evolved and could be exploited.

13.87 The Department will continue to emphasize rewards that reflect changed priorities.

Environmental Sustainability

13.88 In keeping with the general concern about environmental issues in the 1980s, Growing Together identified environmental sustainability as one of the four pillars of policy reform.

13.89 As part of the Agri-Food Policy Review, a Federal-Provincial Agriculture Committee on Environmental Sustainability was set up to develop an action plan to address the environmental issues facing the agri-food sector. The Committee's report was adopted in its entirety by the federal and provincial ministers of Agriculture in August 1990.

13.90 In May 1992 the Standing Committee on Agriculture issued a report to the House of Commons called The Path to Sustainable Agriculture . Several of the Committee's recommendations reinforce those of the Agri-Food Policy Review. The report is also a strong indication of parliamentary interest in, and support for, the need for action on environmental sustainability issues, particularly as they relate to agriculture.

13.91 The Agri-Food Policy Review and the parliamentary report both identify four key activities the Department must pursue:

  • develop indicators that measure the state of key resources such as soil and water, and the extent of key farming practices;
  • use these indicators to monitor the changes in the state of key resources and the prevalence of environmentally desirable farming practices, and the effects on the environment of those changes;
  • implement new environmental programs that encourage environmental sustainability; and
  • review and, where necessary, reform all existing and planned programs and policies to ensure that they do not or will not adversely affect the environment or act at cross-purposes to each other.
Progress in implementation
13.92 Following the adoption of the Report of the Federal-Provincial Agriculture Committee on Environmental Sustainability , the Department did several things:

  • A Bureau for Environmental Sustainability was created to provide departmental leadership for - and co-ordination of - environmental issues. Initially the Bureau, with a budget of $1.3 million, was led by a director general reporting to an associate deputy minister. It is now led by a director reporting to a director general and has a budget of $833,000 for 1993-94, a reduction of 34 percent over two years.
  • A process for complying with the Environmental Assessment Review Process Guidelines Order was put in place.
  • The agriculture component of the Green Plan was developed to address the issues and to implement changes identified in the report. Initial funding of $170 million was later reduced to $155 million in the Government's Economic Statement of December 1992.
  • Pamphlets on environmental sustainability and on the Green Plan were published and widely distributed.
The priority of environmental indicators
13.93 Over the years, the Department has gathered a lot of detailed data on the state of agricultural resources and land management practices. However, there is a gap between these detailed data and the creation of environmental indicators that can be used to monitor changes in the agricultural environment.

13.94 In January 1993, the Department launched a project to develop indicators of environmentally related trends in agriculture. While the primary purpose of these indicators is to support decision makers and policy makers and to facilitate analyses of issues, such indicators must also serve the accountability needs of Parliament.

13.95 The first phase of the project is to develop, by December 1993, a set of indicators based on existing data. The second phase is to refine the initial set of indicators, and identify those areas where new data-gathering procedures will have to be set up. The plan has yet to address a reporting strategy indicating where, to whom and when these indicators will be reported.

13.96 Developing environmental indicators that are meaningful to end-users is not an easy task. As attempts to develop indicators in other fields have shown, it is critical to develop either a reference value or, where that is not possible, a desired direction for change. This kind of interpretive framework is necessary if data are to become useful information for policy-making, planning and accountability purposes.

13.97 For example, one key problem is soil erosion. This is an environmental concern with air and water implications, and an economic concern because of the effect on the soil's productivity. The statistic "number of farms reporting erosion control practices" presents the frequency of use of several practices intended to reduce soil erosion (see Exhibit 13.3 ). The Department plans to use simple statistics like these, based on available data, refining them into more meaningful information later. The basic statistic can be made into an indicator by relating the use of erosion control practices to some measure of the need for their use - for example, the ratio of the number of farms that use erosion control measures to the number that require erosion control.

Green Plan implementation
13.98 There are high expectations for the agriculture component of the Green Plan . It addresses the issues defined in the Report of the Federal-Provincial Agriculture Committee on Environmental Sustainability and is intended to have a significant effect on each. This is to happen through a combination of national initiatives and federal-provincial agreements. As of July 1993, agreements had been signed with nine provinces and one territory, and work had begun on the national initiatives.

13.99 The agriculture component of the Green Plan was designed based on a "review" of previous programs, consisting largely of a subjective assessment of what should continue and what should not. At the agreement level, personal knowledge of related programs, a formal or informal consultation process with stakeholders, and reviews of previous agreements and programs, as available, were used to develop agreements, to determine priorities for action and to define work plans. Little formal quantitative or qualitative analysis was used.

13.100 Lacking reliable information on the extent of agricultural environmental problems, the allocation of Green Plan money among provinces was made on the basis of share of agricultural gross domestic product.

13.101 The measurement of effectiveness. The national objectives for the agriculture component of the Green Plan are presented in Exhibit 13.4 . However, the Department states that, as the development of indicators was not sufficiently advanced, it has not established operational goals for each of the objectives and has not set targets for the extent to which the Green Plan is expected to move matters in the direction of these goals.

13.102 According to the Department, the program was designed to have the management committee for each federal-provincial agreement set its own goals and targets. However, operational goals for the national objectives were not established at the provincial level either. Work plans were developed and include statements of goals such as encouraging adoption of new, more environmentally sustainable farming practices, but these are not further defined. Nor are performance targets set for these goals.

13.103 An evaluation framework is the basis on which the future assessment of a program's effectiveness is built. It is a way to ensure that it will be possible to measure the achievement of objectives at the end of a program, and to test the soundness of the program logic. Government policy requires that an evaluation framework be developed during the planning stages of new programs.

13.104 An evaluation framework for the agriculture component of the Green Plan is only now being prepared. Evaluation frameworks are also being prepared for individual agreements. These were not completed within the timeframe required in the agreements. There is a need for a better articulation of the relationships between national and agreement-level evaluation frameworks.

13.105 Overall, much has been done in developing Green Plan agreements and work plans for each province. The analysis of the effectiveness and efficiency of the program, however, will have to rely heavily on judgmental assessments and consultation with advisory committees. The Department agrees that these should be complemented with quantitative assessments for future programs. This will be possible only if the indicators and measurement tools are developed.

Review of existing policies and programs
13.106 In addition to direct action on environmental issues through new long-term programming, for example the agriculture component of the Green Plan , the Report of the Federal-Provincial Agriculture Committee on Environmental Sustainability identified the need for an immediate reform of existing policies and programs. One of its recommendations called for accelerated reform of policies and programs that contribute to resource-base and environmental degradation. A similar recommendation - to set a timeframe to meet the urgent need to convert existing agri-food policies and programs into an environmentally sustainable food system - was made by the Standing Committee on Agriculture and was endorsed by the government.

13.107 Shortly after the publication of the Report of the Federal-Provincial Agriculture Committee on Environmental Sustainability , a Federal-Provincial Working Group on Program Review was put in place to develop an action plan for addressing environmental concerns within the existing set of policies and programs. This Group was to develop methodology and criteria to assess programs, to test them during the review of the Gross Revenue Insurance Program (GRIP) and the Net Income Stabilization Account (NISA), and to develop a timeframe to conduct reviews of other programs. Although a report was produced by the Working Group, it has never been presented to the federal and provincial ministers.

13.108 Environmental reviews of some programs are in progress. The reviews of programs pursuant to the Farm Income Protection Act, Gross Revenue Insurance Program, Net Income Stabilization Account and Crop Insurance, were scheduled for completion by the end of July 1993. A review of options to the Western Grains Transportation Act was also conducted.

13.109 The Department intends to conduct policy and program reviews when one of the following three factors apply: the policy or program is being changed, there are compelling environmental reasons, or sufficient public concern is demonstrated. In addition, when initiating any program evaluation, its impact on environmental sustainability is to be considered and, if deemed important, will be examined further. While this reactive approach may serve the policy process, it may also leave programs that have a significant impact on environmental sustainability untouched. The Department does not intend to use a structured analysis of the potential risk of environmental impacts of its programs as a basis for setting priorities for its policy and program reviews.

13.110 The Report of the Federal-Provincial Agriculture Committee on Environmental Sustainability included preliminary criteria to assess policies and programs. The Committee did not consider the preliminary criteria as definitive, and recommended that these be developed further and expanded. This has not been done. The Department intends to develop the methodology and criteria to conduct environmental reviews of policies and programs.

Cross-compliance
13.111 Growing Together asserts that all government programs and policies must take environmental sustainability into account in their design and delivery. "Compliance with environmental requirements may have to be encouraged." The Federal-Provincial Agriculture Committee on Environmental Sustainability recommended an immediate detailed examination of the feasibility and acceptability of implementing suitable cross-compliance measures, i.e., measures used to effect compliance or harmony between two or more policies or programs.

13.112 Work has been ongoing in this area. A departmental discussion paper is planned for 1993-94. This work emphasizes cross-compliance as an instrument, among others, to encourage environmental sustainability or to speed up its pace. A typical example would require that farmers have in place approved farm plans demonstrating that they are using environmentally sustainable practices before being eligible for government assistance.

13.113 The Farm Income Protection Act requires that all agreements provide for circumstances under which insurance may be withheld, restricted or enhanced for the purpose of protecting the environment. These circumstances were not clearly identified in the agreements because the Department, in its view, lacked sufficient information on the environmental effects of the programs and on good farming practices. Environmental reviews of the Gross Revenue Insurance Program, the Net Income Stabilization Account and Crop Insurance are now being conducted.

13.114 Examples where some form of cross-compliance could be used, through restrictions or enhancements, are being investigated in the Gross Revenue Insurance Plan review. One would restrict program benefits for annual crops grown on lands classified 4, 5 or 6 under the Canada Land Inventory System. These are "marginal lands", generally considered unsuitable for annual crop production and often highly susceptible to soil erosion and degradation. The Permanent Cover Programs were designed specifically to stop annual crop production on these lands. Departmental estimates indicate that 11.8 million acres of marginal lands are actually used for annual crop production in the Prairies, and that $107 million in federal contributions to ongoing income support programs are spent annually on these lands. The reviews of the Gross Revenue Insurance Program, the Net Income Stabilization Account and Crop Insurance will identify circumstances under which insurance may be withheld, restricted or enhanced to protect the environment. The federal-provincial management committees for these programs will then assess the options and recommend amendments to the agreements to the ministers.

Agreed-to next steps include the following:
13.115 The Department will continue to develop environmental indicators for the agricultural resource sector, including the establishment of reference levels to interpret the indicators. The Department will monitor and report on changes in the state of the resources and their effect on the environment to assist at all levels of decision making.

13.116 The Department will monitor and report the results of the Green Plan in relation to its national objectives. Furthermore, it is committed to ensuring that it has the data to assess quantitatively the efficiency and effectiveness of future programs.

13.117 The Department will continue to examine cross-compliance issues and, where feasible, will provide for the circumstances under which payments can be withheld, restricted or enhanced for the purpose of protecting the environment.

Farm Management Skills

13.118 Growing Together pointed to the adoption of new technology and better production and financial management skills as critical if producers are to respond more effectively to changing consumer demands for new and different products. Improved management skills and increased use of new technology will help farmers to identify additional ways of reducing input costs, and/or increasing revenue, to achieve an improved net farm income.

13.119 The Task Force on Farm Finance and Management recommended establishing a national program for farm management training, services and information.

A new program
13.120 In July 1991, a proposal for the National Farm Business Management Program was accepted by the federal and provincial ministers of Agriculture. Co-ordination of farm business management programming across provincial boundaries was viewed as the primary function of the national program. Approval for the National Farm Business Management Program to run from April 1992 to March 1995, at a total federal cost of $30 million, was given in April 1992.

13.121 In each province, the National Farm Business Management Program has been characterized by a separate federal-provincial agreement. For the most part, the program builds on farm business management activities that existed prior to its launch at both the national and provincial levels. According to departmental reports, provincial contributions to the Program - with the exception of one province - represent ongoing farm management programming.

13.122 At the national level, projects and courses under the National Farm Business Management Program were delivered in 1992-93, with the exception of two provinces. All federal-provincial agreements had been signed by April 1993.

Program administration
13.123 The Department of Agriculture created the Canadian Farm Business Management Council to monitor and guide the implementation of the National Farm Business Management Program and to co-ordinate farm business management activities undertaken at the national level.

13.124 An important aspect of developing national programs is establishing consistent approaches and national standards. The importance of these can be seen in the results of projects such as the Farm Accounting Standardization Manual . The weakness in not having national standards is apparent in the results of the provincial training-needs assessments, where there was no national standard or model to ensure that common standards were followed. The lack of a national standard or model in conducting the training-needs assessments may have resulted in some training needs being overlooked. It will also make sharing information among the provinces more difficult.

Program effects
13.125 While studies completed by the Department have shown that management ability positively affects net farm income, there was no analysis completed to determine the optimal level of financing for the National Farm Business Management Program. Without an economic impact analysis of the program, it is not known what the impact of $30 million over three years may be on farm profitability in Canada. Such a study should be completed and presented to decision makers as part of any program renewal efforts.

13.126 The first year of the program has been productive. However, only two years are left in which to achieve its founding objective: to improve the financial viability of farm operations across Canada. It is not clear how the benefits derived from improved farm management skills, generally recognized to be long-term, can be achieved in this time.

Agreed-to next steps include the following:
13.127 The Department will ask the Canadian Farm Business Management Council to continue to perform needed research, monitor the results of training and use this information to conduct an economic impact analysis. For example, it may be useful to track the impact of the program on the farm profitability of selected participants.

13.128 The Department will develop common approaches and national standards to be incorporated in any future federal-provincial agreements, to ensure maximum co-ordination and co-operation among stakeholders.

13.129 The Department will assess and make recommendations respecting the three-year time frame of the National Farm Business Management Program against the long-term objective of farm profitability.

Regulatory Review

Background
13.130 Growing Together urged the removal of regulatory obstacles to competitiveness. In June 1990 the Task Force on Competitiveness also recommended improving the regulatory environment for the agri-food industry.

13.131 The government's 1992 budget required a full review of federal regulations and the regulatory process, including areas of potential deregulation or re-regulation. The reasons for the review include the need to improve competitiveness, use government resources more effectively, reduce cost to industry and consumers, and ensure an appropriate relationship between the costs and benefits of the regulatory regime. According to the government, "this review should require a public rejustification of existing regulations that are to be retained to ensure that those which stifle the creativity and efficiency required by Canadian business to compete and grow in today's modern world, or which serve no public good, are removed."

13.132 The Standing Committee on Finance was mandated to examine the review process and report on 30 September 1992. Ministers of Agriculture felt that the Department should report by the same date. The Department accomplished a great deal in a short period of time. Following its review, the Standing Committee on Finance reported that, "of the three departments (Agriculture Canada, Transport Canada and Consumer and Corporate Affairs) undertaking reviews, Agriculture Canada was the most advanced."

13.133 Although the regulatory review was directly mandated by the 1992 budget, the need for a review and much of the thinking behind it were, according to the Department, an integral part of the Agri-Food Policy Review, and it asked us to include the regulatory review as part of our audit.

The review process in the Department of Agriculture
13.134 The review covered regulations with respect to Grains and Oilseeds and Food Production and Inspection. These reviews were conducted in parallel, using common departmental structures.

13.135 An advisory panel was established to challenge and guide both components of the review, ensure that the views of external stakeholders were considered, and review the criteria used to assess the regulations. A secretariat was established to link the panel, branches and other departments.

13.136 The Grains and Oilseeds review dealt mainly with regulations administered by the Canadian Wheat Board and the Canadian Grain Commission. A review of regulations pertaining to the Livestock Feed Bureau was undertaken concurrently.

13.137 Food Production and Inspection Branch reviewed all regulations in its Acts, except those related to pesticides and racetrack supervision. The Food Production and Inspection regulations were reviewed in four groups: Horticulture, Animal Products, Animal and Plant Health, and Inputs (i.e., fertilizers and seeds).

13.138 The Department developed criteria to provide a consistent base for evaluating the regulations. They included a competitiveness test based on one developed by the Agri-Food Competitiveness Council.

13.139 Sets of tailored questions were developed as a guide to stakeholders in formulating their comments on the regulations. They were also used to structure discussions and follow-up interviews with stakeholders.

13.140 To ensure a thorough review of the regulations, the Department involved both departmental staff and a wide spectrum of stakeholders in assessing regulations that directly affected them. In light of the limited time, this process presented challenges to the Department in terms of identifying and contacting a broader spectrum of stakeholders, designing a consultation protocol, and analyzing the responses.

13.141 The results of the review have already been substantial in terms of the numbers of regulations that have been modified or deleted. However, further results will be seen as the subsequent reviews of the many regulatory sets identified for additional study are completed.

Lessons learned
13.142 As a result of our examination of the regulatory review process at the Department of Agriculture, we have identified several "lessons learned" that fall under the headings of Consultation, Criteria, Co-ordination and Control ( see Exhibit 13.5 ). We and the Department agree that these could serve as a guide for other departments embarking on the process of regulatory review, and for the Department in subsequent reviews. These "lessons learned" represent a mix of what worked, what could have worked better and what could have been done to improve the process.

Agreed-to next steps include the following:
13.143 The Department will develop an ongoing review process to schedule the review of all regulations on a cyclical basis. This will also help stakeholders to better plan their participation in the reviews.

13.144 The Department will continue to develop ways to ensure that the invitation to participate in the review process is extended to all interested stakeholders. In particular it is working to find ways to better capture the views of the provinces, consumers and the general public.

Pesticides Registration Review

Background
13.145 The Pest Control Products Act has not been amended significantly since 1969. Our 1988 Report raised a number of concerns about the operation of the registration process. In 1989, as a result of this and a number of other widely held concerns, the Minister of Agriculture launched a comprehensive review of the pesticide registration system. These concerns included: the lack of transparency in the registration system; the knowledge that older, more commonly used pesticides would not meet current registration standards; and the fact that certain products were not available to Canadian producers or were much more expensive than in other jurisdictions.

13.146 The review team issued its final report in December 1990. In October 1991, the government accepted the thrust of the review team's 27 recommendations and indicated it would proceed with the implementation of a revised regulatory system based on these recommendations.

Progress in developing a new system
13.147 The government has stated that the Pest Control Products Act and Pest Control Products Regulations administered by the Department of Agriculture will be amended, to entrench the revised roles and responsibilities of the departments of Health and Welfare, Environment and Forestry and to incorporate several new initiatives.

13.148 It has established an Interdepartmental Executive Committee to manage the pesticides registration process and to meet operational standards for on-time performance. A Pest Management Secretariat was established to support the Executive Committee.

13.149 The government has approved the expenditure of around 257 person-years and $81 million over six years to implement the recommendations of the review team and to facilitate the ongoing registration process.

13.150 Progress has been made in a number of areas, for example, the expansion of the minor use program, the price monitoring program and the product import program.

Agreed-to next steps include the following:
13.151 The Interdepartmental Executive Committee is continuing efforts to better integrate the various registration responsibilities and activities now carried out by the departments of Agriculture, Health and Welfare, Environment and Forestry, and to ensure the timely approval of products during the transition.

13.152 The government recognizes the need to enact the new legislation in order to provide a foundation of stability, predictability and accountability for a revised system.

ANNEX A

Recommendations Arising from the Agri-Food Policy Review Used as Audit Criteria

Market and Trade Development

  • A market development strategy (both domestically and internationally) should be developed.
  • Market information for producers and processors should be more useful and accessible.
  • There is a need for better co-ordination among federal and provincial governments and industry in market development.
  • There is a need for better co-ordination among federal and provincial governments and industry in the provision of market information.
Research and Technology Transfer

  • Research efforts should be targeted in order to achieve competitiveness.
  • Adoption of the best available technology by producers and processors to gain and maintain market access, including technology developed outside Canada, is a critical step to the achievement of competitiveness.
  • There should be more joint ventures between government and the private sector to meet competition, and greater private sector involvement in research.
Environmental Sustainability

  • Develop indicators to monitor and assess the state of natural resources and environmental quality in relation to agriculture.
  • Develop and implement long-term, cost-shared environmental sustainability agreements to provide additional resources for measures such as technical and financial assistance, monitoring, research, education and awareness activities, to encourage adoption of sound resource management practices.
  • Review programs and activities related to environmental sustainability issues so that long-term support is both adequate and responsive to regional conditions and needs.
  • Accelerate reform of policies and programs that contribute to resource-base and environmental degradation, and reallocate resources to support environmental sustainability.
  • Adopt consistent criteria for assessing the environmental sustainability of agricultural policies and programs.
  • Immediately initiate a detailed examination of the feasibility and acceptability of implementing suitable cross-compliance measures in federal and provincial agricultural programs.
Farm Management Skills

  • Research what farm management training and advisory services are needed.
  • Establish a national program for farm management training, services and information.
Regulatory Review

  • Review existing regulations to ascertain whether they comply with the objective of greatest prosperity for Canadians. Part of this review should require public "rejustification" of existing regulations.
Pesticide Registration Review

  • The Pest Control Products Act and Regulations will be rewritten and entitled the Pest Management Act and Regulations. Subject to constitutional constraints, the legislation will incorporate a comprehensive approach (cradle-to-grave) to pesticide regulation.