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1993 Report of the Auditor General of Canada

Assistant Auditor General: Paul Ward
Responsible Auditor: John Wiersema

Main Points

16.1 While forest management on provincial lands is the responsibility of provincial governments, the federal government can also affect forest management through its responsibility for, among other things, trade, scientific research, the environment, and federal lands. Some of the federal responsibilities are carried out, at least in part, by the Department of Forestry. The objective of our audit was to determine whether the Department can be reasonably confident that it is successfully carrying out its mission to promote the sustainable development and competitiveness of the forest sector.

16.2 In general, we found that the Department has successfully influenced forest stewardship nationally and internationally. However, the Department has not sufficiently clarified the objectives of its research programs and its forest sector development activities so that its success in promoting sustainable development and competitiveness can be assessed. As a result, it is not sufficiently clear what the Department is accountable for achieving through these programs and activities. Accordingly, we have concluded that, during the period covered by our audit, the Department could be reasonably confident that certain programs and activities successfully promoted sustainable development and competitiveness, but it could not be reasonably confident that others did.

16.3 Specifically, we found that the Department positively influenced forest stewardship at the national level by assisting forest sector stakeholders in establishing a framework for the sustainable development of forest resources - the Canada Forest Accord and the National Forest Strategy . It helped focus international attention on the wise use of global forest resources and the need for a multilateral convention on forestry practices. In addition, the establishment of the Model Forest Network by the Department has already served an important purpose by providing a mechanism whereby various forest sector stakeholders can work together in managing forest resources.

16.4 The Department has not yet completed its assessment of the role of its research activities in support of sustainable development by identifying the most appropriate research issues for it to address. In this context, the Department has not articulated clear research goals and priorities. A new strategic plan for its research program, explaining how the Department will promote sustainable development through research, is urgently needed.

16.5 For its forest sector development activities, the Department has re-oriented the general aim of its individual development agreements with provinces and territories to support sustainable development. However, the Department:

  • explains that, historically, it has not been responsible for the allocation of forest sector development funds among agreements and that other priorities, such as regional development, took precedence over sustainable development and competitiveness in these decisions;
  • did not conduct a rigorous analysis of the sustainable development and competitiveness needs within provinces as a basis for the allocation of funds among the specific programs the agreements support; and
  • did not ensure that clear objectives were set for these agreements.
16.6 Finally, the Department needs to improve the performance information it provides to Parliament on the success of its research and its forest sector development activities.

Background

Mandate and Mission of the Department

16.7 The principal statutes authorizing the activities of the Department of Forestry are the Forestry Act and the Department of Forestry Act (1989). Consistent with these Acts, the Department's mission is "to promote the sustainable development and competitiveness of the Canadian forest sector for the well-being of present and future generations of Canadians."

Programs

16.8 As described in Part III of the Estimates, most activities of the Department fall into one of three areas: forest research and technical services (including scientific inquiry into areas such as forest environment, forest production, forest protection from insects, diseases and fires and the dissemination of research findings); forestry development (encouraging sustainable forest sector development through forestry development programs and federal-provincial/territorial forest resource development agreements - FRDAs); and, finally, administration (including work on forestry issues related to industry and trade, international relations, statistics and economic analysis, as well as public information on forests and forestry). The Department also supports national and international efforts to improve forest stewardship.

Resources

16.9 According to its Estimates for 1992-93, the Department delivers its programs with the following resources:

Constitutional Roles

16.10 The Constitution establishes forest management on provincial land as a responsibility of provincial governments. Each province has its own forestry legislation, regulations, standards and programs through which it controls harvesting rights and resource management responsibilities. The federal government can also affect forest management and the forest sector in that it has direct or shared responsibility for industrial and regional development, trade, international relations, taxation, science and technology, the environment, federal lands, Indian affairs, employment and training, pesticide regulation, national statistics, national parks and fisheries.

16.11 The Department of Forestry directs most of its program efforts and the majority of its research and FRDA resources to support forest stewardship. In other words, the Department's main programs are intended to help forest managers (principally provincial and territorial governments, but also private woodlot owners, federal departments, Indian bands and industry) in the sustainable development of forests.

Sustainable Development

16.12 The major part of the Department of Forestry's mission is the promotion of sustainable forest sector development. While this mission reflects the present concern that the impact of human activities must respect the tolerance limits of forest ecosystems, the interest is not new: in North America, it is the latest expression of a long conservationist tradition. The idea of environmentally sustainable economic development in its present form received worldwide attention in 1987 through the report of the World Commission on Environment and Development, titled Our Common Future . The Commission defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

16.13 The 1990 report of the Standing Committee on Forestry and Fisheries emphasized that stewardship of forest resources was the essence of sustainable development. The Committee wrote that "stewardship is the principle by which sustainable development is achieved."

16.14 The 1992 National Forest Strategy, which arose from a consensus among government, industry and other organizations to deal with common problems in co-ordinated ways, also adopts stewardship as one of its central values. Through the Strategy , forest management agencies are working toward a shared vision for Canada's forests. A guiding principle of the Strategy is that "sustainable forest management recognizes a forest's potential to sustain a range of values and establishes targets for an optimal mix of uses." In that context, a shared vision means articulating the desired future state of the forests by specifying clear goals for the economic, environmental and social values inherent in forest resources. The Strategy describes sustainable development as an expansion of the principle of sustained timber yield by including other values such as wildlife and fish habitats, watersheds and hydrological cycles, as well as species diversity.

16.15 Sustainable development is a broad concept, and operational application is now the challenge for forestry managers. This means that the term "sustainable development" by itself does not provide a self-evident set of associated objectives and responsibilities for a government agency wishing to promote it. To provide a sound basis for accountability, the Department of Forestry would need to clearly define its goals, priorities and intended actions in the context of promoting sustainable development.

Competitiveness

16.16 The forests of Canada support a large industrial sector, and part of the Department of Forestry's mission is to promote sectoral competitiveness. In 1991, according to the Department, 299,000 people worked directly in the forest industries, and they produced $20.6 billion in exports. Overall, the forest sector directly contributed 2.9 percent of Canada's gross domestic product.

16.17 The National Forest Strategy recognizes the obvious importance of the forest sector to the national economy. According to the Strategy , the competitiveness of Canada's forest industries "depends on the development and application of advanced technology, access to markets, a favourable investment climate, a reliable wood supply and a skilled and adaptable workforce." The Strategy goes on to note that environmentally sound forest management practices and manufacturing processes contribute to the country's ability to sell its goods and services in foreign markets.

16.18 Similarly, the Department's report to Parliament, The State of Canada's Forests 1991 , explains that "the position of Canadian forest products in international markets is generally determined by:

  • the costs of inputs (timber, energy, labour and capital) to manufacturing and distribution processes;
  • the efficiency of manufacturing and distribution processes in using these inputs (i.e., their productivity);
  • the currency exchange rates between Canada and its competitors; and
  • the competitive quality of Canadian products."
16.19 Competitiveness is a multidimensional issue; a stable supply of wood fibre is important, but by itself will not improve manufacturing efficiency or marketing effectiveness. The Department of Forestry has worked with other departments on various aspects of competitiveness and on other trade-related issues, such as the softwood lumber and the pinewood nematode trade disputes. It has partnership arrangements with the Forest Engineering Research Institute of Canada and with Forintek Canada Corporation, which address aspects of competitiveness. Generally speaking, however, the Department directs most of its resources to forest stewardship, and thereby affects competitiveness through the supply of wood fibre.

Audit Objective and Conclusion

16.20 The objective of our audit was to determine whether the Department of Forestry can be reasonably confident that it is successfully carrying out its mission to promote the sustainable development and competitiveness of the forest sector. We reviewed the Department's efforts in this regard from its creation in 1989 to April 1993. We did not examine its financial control practices, as we were satisfied that they were being adequately reviewed by the Department's internal audit function.

16.21 We audited the following aspects of the Department:

  • its efforts to influence forest stewardship nationally and internationally and to provide leadership for federal forestry initiatives;
  • its research and development programs;
  • its forest resource development agreements with British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick; and
  • its reporting to Parliament on these activities and on the condition of Canada's forest resources.
16.22 To be accountable for fulfilling its mission, we expected that the Department would:

  • clarify its mandate and mission by identifying the sustainable development and competitiveness issues that are within its mandate to address, setting its priorities and goals opposite these issues, and developing or modifying programs to achieve its goals;
  • practice good management by safeguarding public property and maintaining appropriate financial controls, delivering its programs with due regard to economy, efficiency and effectiveness, and following government policies; and
  • report to Parliament on how successfully it is carrying out its mission, the use of resources, and operational performance.
16.23 By defining its responsibilities clearly, carrying them out properly and reporting on the results, the Department can accomplish two important things: it can be reasonably confident that it is fulfilling its mission; and it will have created a sound basis for accountability both within the Department and to Parliament.

16.24 In general, we found that the Department has successfully influenced forest stewardship nationally and internationally. However, the Department has not sufficiently clarified the objectives of its research programs and its forest sector development activities so that its success in promoting sustainable development and competitiveness could be assessed. As a result, it is not sufficiently clear what the Department is accountable for achieving through these programs and activities. Accordingly, we have concluded that, during the period covered by our audit, the Department could be reasonably confident that certain programs and activities successfully promoted sustainable development and competitiveness, but it could not be reasonably confident that others did.

Observations and Recommendations

Creating a Shared Vision: Influencing Forest Stewardship

16.25 In its response to the 1990 report of the Standing Committee on Forestry and Fisheries, the government stated that it established the Department of Forestry as a separate department with an important element of its mandate being to "co-ordinate the development and implementation of federal forestry policies and programs and to provide leadership in bringing all forestry stakeholders together to find consensus on satisfactory solutions on the sustainable management and use of Canada's forests." There are three forums within which the Department can influence forest stewardship: in national discussions of common principles of forest stewardship; in federal government forest sector initiatives; and in international discussions of sustainable forest resource development.

16.26 In order to carry out its responsibilities in these three areas, we expected that the Department would work with other federal departments and agencies, provincial and territorial governments, industry and other interested parties, to help:

  • clarify and address national problems of sustainability and competitiveness in the forest sector;
  • develop and implement a co-ordinated federal response to sustainability and competitiveness issues in the forests and forest sector, and to help manage forests on federal lands; and
  • advance Canada's interests abroad on forest-related issues.
Stewardship of forests in Canada: the Department's role
16.27 Since the turn of the century, there have been repeated calls for a national policy on forest stewardship ( Exhibit 16.1 ). A "national" policy in this sense refers to a country-wide consensus on similar approaches to common problems and opportunities rather than to a policy of the federal government. The long-standing rationale for a national policy is that forest stewardship is a responsibility shared by the federal and provincial governments, by industry and by other users of forest resources.

16.28 The 1980 Canadian Forest Congress, jointly sponsored by forest industry and labour groups, considered national forest sector management issues and economic development concerns. In the mid-1980s, the Canadian Council of Forest Ministers sponsored four discussions on the forest sector leading up to the Canadian Forest Conference of 1986. The results of these meetings formed the basis for the development of A National Forest Sector Strategy in 1987. However, public attitudes toward the uses of forest resources continued to change, and in 1990 the Council set out once again to achieve a national consensus on new directions for forest management. This process culminated in the signing of the Canada Forest Accord and adoption of the National Forest Strategy in 1992 ( Exhibit 16.2 ).

16.29 The Department of Forestry has actively participated in the Canadian Council of Forest Ministers since its creation in 1985, and was instrumental in facilitating the work and discussions that produced the Accord. This agreement commits the federal government, along with the other signatories, to a series of actions in support of sustainable forest development. In addition, the Council agreed to create a coalition among all signatories to the Accord to oversee the implementation of the Strategy .

16.30 To respond to federal commitments under the Strategy , the Department of Forestry has formed both an intradepartmental task force and an interdepartmental committee and has identified federal goals and objectives in relation to the Strategy . Work schedules and action plans have been provided to the Department by the other departments involved.

16.31 The Department of Forestry, by co-ordinating the development of the Canada Forest Accord and the National Forest Strategy , has assisted provincial and territorial governments, industry and other non-government organizations in establishing a national framework for the sustainable development of forest resources. The Accord and Strategy constitute an important starting point for sustainable forest resource development.

Federal forestry initiatives: the Department's role
16.32 Many federal government programs affect the forests and the various constituencies that make up the forest sector. The 1990 report of the Standing Committee on Forestry and Fisheries identified 15 federal departments and agencies involved in forest-related matters. In its 1990 strategic plan, the Department of Forestry set out two roles for itself in ensuring an appropriate mix of federal policies and programs: first, the Department planned to co-ordinate the development and implementation of federal forestry policies and programs by formulating an integrated and comprehensive federal forest policy by the spring of 1992; second, the Department made a commitment to provide other departments and agencies with policy and technical advice on industry and trade matters and on forest management on federally owned lands. In response to the Standing Committee's report, the government restated the Department's responsibility to co-ordinate the development and implementation of federal forestry policies and to strengthen co-operation on forest issues at the federal level.

16.33 We found that the Department has worked with other departments to ensure that forestry issues are reflected in broader federal initiatives such as the Green Plan , the federal government's action plan on the environment, and the Prosperity Initiative, a consultation process focussing on competitiveness issues in the major sectors of the economy. The Department has provided technical advice to other departments on forestry-related matters such as the softwood lumber trade dispute and newsprint recycling. The Department has also provided forestry services to other departments managing forest lands. However, despite the government's intention that interdepartmental agreements would be reviewed in the context of the Department's mission, the Department has not yet updated most of its memoranda of understanding with other departments to reflect the goals of sustainable development.

16.34 With regard to the Department of Forestry's role in overall federal co-ordination, it has not yet established an integrated and comprehensive federal forestry policy. However, the Department has been involved in two interdepartmental policy planning processes dealing with forestry: the Prosperity Initiative, in particular the federal response to the report of the Forest Sector Advisory Committee; and the implementation of federal commitments under the National Forest Strategy . In our view, the Department needs to assess the scope of the policy implications of these two initiatives and report to the government on whether a separate, integrated federal forest policy is still needed.

Stewardship of forests internationally: the Department's role
16.35 The National Forest Strategy and the Green Plan recognize the importance of the world's forests to the health of the planet and acknowledge the significant role played by Canada as the steward of a substantial portion of those forests. In support of sustainable forest development worldwide, the Department of Forestry is working with international bodies, such as the United Nations Food and Agriculture Organization and its Committee on Forestry, the Organization for Economic Co-operation and Development and the International Tropical Timber Organization.

16.36 The Department of Forestry made a significant contribution to the United Nations Conference on Environment and Development in June 1992. In particular, the Department helped expand the pre-conference debate from a narrow focus on tropical deforestation to include the broader issues of conservation, management and sustainable development of forest resources. The Department was also deeply involved in the process leading to the adoption of the non-legally binding statement of forestry principles by the Conference.

16.37 The Department has helped focus international attention on certain worldwide forest problems and the need for a multilateral convention on the conservation and sustainable development of global forests. An international convention on global forests could help to protect forest environments worldwide. It could also serve Canadian interests by helping to preserve access to traditional export markets through the establishment of internationally accepted norms for sustainable forestry.

Understanding Forests: The Department's Research Programs

Forest research in Canada
16.38 The National Forest Strategy identifies two main areas of forest research: forest management and forest products, processing and equipment. The Strategy observes that, through the Department of Forestry and its predecessors, the federal government has focussed principally on forest management research, and the Department is the country's largest forest management research organization ( Exhibit 16.3 ). Provincial forestry ministries also support forest research, and the Department advises that Quebec, Ontario, and British Columbia carry out their own research programs in specific fields. In addition, industry and universities engage in research into forest management and products.

16.39 Forest management research, whether it is directed at creating new knowledge or developing management applications, supports forest stewardship. In 1992, the Science Council of Canada commented that "in the new era of sustainable forestry development, if there is any real hope of maintaining and expanding present uses of the forests, as well as their environmental values and capabilities, forest research must not only reflect these goals, but it must also lead the way toward them."

Defining the Department's research goals and priorities
16.40 The Department's strategic plan (1990) commits it to reassessing and clarifying its research role and to developing a national research agenda and priorities in the context of promoting sustainable development. We expected that the Department would have identified the most appropriate research areas for it to pursue, by undertaking a broad assessment of the new knowledge and management applications needed to develop forest resources sustainably. Such an assessment would have identified which research and development agencies were already working on relevant lines of enquiry, and how respective efforts would be co-ordinated. In this context, the Department would have defined its role in addressing these research issues by defining clear goals for its research programs.

16.41 We found that over the past few years the Department has undertaken an ongoing series of strategic analyses and assessments, each with a different scope, which generally outline some aspects of its research directions and intentions. These various analyses are meant to guide the selection of individual projects by departmental research managers. However, the Department has not specified the role that it would play in pursuing these directions by setting clear, attainable goals for its research efforts. We noted that the most recent strategic plan, setting out the medium- to long-term directions and priorities for all the Department's research activities, was prepared in 1987. It makes no reference to the idea of sustainable development and little or no reference to many of the more recent issues, such as climate change, biodiversity and the non-consumptive use of forest resources, that have emerged in the context of sustainable development.

16.42 In late 1991, the Department undertook a "national forestry science and technology agenda" initiative. Its purpose was to recommend ways to enhance the country's forestry research and development efforts by reassessing the roles, responsibilities and interrelationships of Canada's researchers and research users. However, the initiative was not intended to address the question of future research needs and relative priorities for the Department; this was to be the subject of future work.

16.43 In our view, a new strategic plan for the Department's research program is urgently needed to explain how the Department intends to manage its research efforts to promote sustainable development.

Results-oriented research
16.44 A recurring theme among reviews of government research and development programs is that research activities should be closely tied to mission-driven goals, with expected results, timing and impact established in advance. While recognizing the inherent difficulty of the task for scientific programs, we expected the Department to have clearly defined its individual research and development programs in terms of expected results toward specific research goals, so that the success of these programs could be determined and accountability would be evident.

16.45 As previously noted, the Department has several strategic plans for research: the 1987 plan for all its research and development programs; the 1990 departmental strategic plan, which touches on research; a plan for each of the eight research establishments; and several plans for individual fields of study, such as climate change and bioenergy. However, none of these plans clarifies the results needed to attain clear research goals. Instead, the plans are activity-oriented, with research goals expressed as actions, such as "studying the effects of" or "monitoring the health of", which set the direction that research will follow, rather than the expected outcomes. Targets are established for individual research projects, but we found they are frequently not time-bound, or specific.

16.46 Without a clear set of expected results linking the Department's research activities nationally, management of each establishment interprets for itself how best to carry out the Department's research intentions. While departmental co-ordinating committees are in place and departmental researchers co-operate and collaborate on projects, they lack clear goals on which to focus and therefore their efforts are process-oriented. In our opinion, departmental research programs can be described, to a greater or lesser extent, as the sum of individual projects in the same area of scientific inquiry, rather than as a co-ordinated set of related research activities aimed at resolving a specific forest stewardship issue or problem.

Selecting research projects
16.47 We expected to find a clear and rigorous selection framework for the Department's research projects. Within such a framework, project selection criteria would support research program results and goals.

16.48 As discussed above, the Department has not articulated clear goals for its research and development programs. Consequently, we were unable to assess meaningfully whether those projects that were selected supported departmental goals. Instead, we could look only at the process used by the Department to review and select projects, and we found that it varies with the source of research funding. For Green Plan , FRDA and interdepartmental projects, a co-ordinating committee reviews and approves research proposals. The selected projects represent the research to be carried out during the time frame of the program plan, usually five years. However, the expected results from this research are not aggregated and incorporated into the strategic plans as a basis for program-level accountability.

16.49 The remainder of the Department's research projects are selected by regional management. Regional managers receive advice from provincial forest research advisory committees. When evaluating research proposals, management considers factors such as scientific merit and suitability; however, the reasons why certain projects were selected over others were not documented.

16.50 It is possible for the Department to link all of its research projects to its mission to promote sustainable development. However, without clear program goals supported by rigorous project selection criteria, the Department can have little confidence that it is systematically addressing the research issues most relevant to sustainable development with well-selected research projects and studies.

Management of research quality
16.51 The National Advisory Board on Science and Technology, which reported to the Prime Minister in 1990, reviewed the key characteristics of successful government research and development programs. Among other things, the Board recommended that management conduct periodic evaluations of research quality and relevance and that it strongly commit to rigorous planning and budgeting.

16.52 The Department uses periodic peer reviews by internal and external experts to evaluate the scientific quality of its in-house research projects. However, only those recommendations agreed to by regional management are incorporated into the subsequent year's work plans; and there is no review of a decision not to accept certain recommendations. Follow-up, to ensure that management has acted on the recommendations to which it agreed, is delayed until the next peer review, three years later. Furthermore, the Department advised us that it is at least one year behind schedule on peer reviews. These limitations lessen the value of the peer reviews in helping to ensure research quality.

16.53 In addition to evaluating research quality, we expected management to monitor research projects against plans and budgets. In our 1988 audit of the Canadian Forestry Service (the predecessor of the Department of Forestry), we recommended that monitoring include cumulative cost information for each research project and assessment of the potential costs and benefits of research devoted to specific lines of enquiry. We found that annual status reports are prepared for projects funded from the Green Plan , FRDAs, or through collaboration with external partners. For projects funded from the Department's ongoing established funding base, however, the only status reports are abbreviated versions in the Department's computerized work planning system. This system is new and does not yet capture cumulative or projected costs. While management also conducts informal reviews of these projects as part of the annual planning process, we found no formal record of findings or of approved changes to plans resulting from these reviews.

16.54 The Department has established a reasonable framework to ensure the scientific quality of individual research projects. However, to ensure the continued relevance and cost-justification of all research projects, improvements are needed in the way certain measures are carried out.

Communicating research results to users
16.55 Research results, if they are to have any practical relevance, must be communicated effectively. As one measure of this, we expected to find that scientists and project managers were accountable for knowledge transfer; as another measure, we expected that evaluations of research projects would include an objective assessment of the success of knowledge or technology transfer.

16.56 We found that performance evaluations for scientists and project managers do take into account various forms of knowledge transfer, such as journal articles or field demonstrations. However, the success of such transfers is assessed through informal client contacts. Although the Department's program evaluation function has started to look at this issue, the Department has no ongoing, objective way of evaluating how well it has communicated research results. As a consequence, the Department has limited information on whether its research results are reaching the people who could use them.

Reporting to Parliament on the Department's research results
16.57 To assess the quality of information reported to Parliament on research results, we examined the relevant sections of Part III of the Department's Estimates for 1992-93 and 1993-94.

16.58 The Department's reporting in Part III consists mainly of information on activities, rather than achievements. Many of the same activities were reported under the heading of "accomplishments" in both years. Without clear statements of goals, Parliament has little information on which to judge the success of the Department's research program.

16.59 While the Department uses financial and other resources from external sources and FRDA funding for its research programs, these resources are not reported to Parliament as part of the cost of its research. Resources from external sources are not reported at all, and the funding through the forest resource development agreements of research carried out by the Department is not reported as such. We estimate that the Department and its external partners spent $12 million more on departmental research than is reported in the 1992-93 Estimates Part III. Therefore, Parliament has not been informed of the full amount of resources used by the Department's research and development program, or of the Department's success in leveraging resources from outside the federal government for its research.

16.60 The Department should address how its research program will promote sustainable development by:

  • identifying the new knowledge and management applications needed to develop forest resources sustainably; and
  • ensuring that expected results for research programs are clearly defined at the outset and that they support attainable goals.
Department's response: Sustainable development is a key focus of the Department's research program and is recognized in its departmental strategic plan and Green Plan program documentation. However, the Department recognizes the need to develop a new strategic plan for research that is integrated with the various subject- specific plans, and which is more precisely linked to sustainable development needs and identifies as clearly as possible expected research results. The Department has put in place a process and is working toward developing such a strategic plan over the course of the next fiscal year.

16.61 The Department should also ensure that:

  • all research projects are regularly reviewed for relevance and cost-justification;
  • it assesses, on an ongoing basis, how well it is communicating its research results to clients; and
  • research results and related costs are reported fully and accurately to Parliament.
Department's response:

  • The Department agrees with the importance of regular reviews of its research projects and will be re-examining all of the components of the existing system to improve it over the course of the next fiscal year.
  • The Department acknowledges the importance of effectively communicating research results to clients, and is continually working with them to develop better and more cost-effective ways of ensuring successful technology transfer. Accordingly, the Department will be reviewing its mechanisms for monitoring technology transfer over the course of the next fiscal year.
  • The Department agrees with the need to further improve its reporting of research results to Parliament. The Department will present its research expenditures and accomplishments as fully and accurately as possible.

Improving Forest Management Practices: Forest Resource Development Agreements

Introduction
16.62 Forest resource development agreements (FRDAs) are an important means by which the Department can influence the direction of forest stewardship and applied forestry research in Canada to support sustainable forest development.

16.63 FRDAs, which are signed and jointly funded by the federal and provincial/territorial governments, are subsidiary agreements to federal-provincial economic and regional development agreements. The Department's regional research establishments negotiated the agreements with the provinces and participate in program administration through joint management committees.

16.64 These agreements "are designed to stimulate increased levels of forest management by the provinces, industry, woodlot owners, Indian bands, and federal departments and to provide a program of research and development, and technology transfer in support of forest management planning and silviculture." Increasing the supply of wood fibre is a primary objective of the agreements, receiving 71 percent of the funding ( Exhibit 16.4 ).

16.65 Federal contributions over the five-year life of the current round of agreements will total approximately $500 million. We examined the agreements negotiated with New Brunswick, Manitoba, Saskatchewan, Alberta and British Columbia, which represent approximately 38 percent ($195 million) of the total federal funding provided for the current round of agreements ( Exhibits 16.7 , 16.8 , 16.9 ).

Guiding principles
16.66 FRDAs have evolved over time as successive rounds of agreements addressed changing priorities. For the current round, the Department developed "eight guiding principles" to redirect the agreements in line with its new mandate to promote sustainable development and competitiveness. The Department successfully negotiated agreements with all of the provinces and territories, incorporating these principles.

16.67 The first of the eight principles stipulates that provinces must elaborate long-term forest management plans consistent with sustainable development. Three of the five agreements we audited included a provincial commitment to develop, within one year of signing, a long-range plan outlining forest strategies (including non-timber forest values) over a full rotation and addressing key forest development issues. These commitments have not yet been met ( Exhibit 16.5 ), although the Department advises that all the plans are being developed. The British Columbia agreement committed the Province to continue developing a long-term plan, not to complete one within the time frame of the agreement; the Alberta agreement commits the Province to complete a plan by 1995. The preparation of these plans is a complex undertaking requiring co-ordination among different provincial agencies, public reviews and multisector consultations.

16.68 According to the Department, federal expenditures under the new agreements have shifted away from areas of provincial jurisdiction. The agreements contribute to advancing basic forest management by successfully embedding an "incrementality" principle into the current round. This principle states that the responsibility for protection, harvest planning and prompt renewal of harvested lands ("basic forest management") belongs to the landowner, for both Crown and industrial freehold lands.

Funding of agreements
16.69 The Department of Forestry Act instructs the Minister to have regard to the integrated management and sustainable development of Canada's forest resources, and to seek to enhance the utilization of Canada's forest resources and the competitiveness of Canada's forest sector. The Department's mission also emphasizes this responsibility for promoting sustainable development and competitiveness.

16.70 In accordance with its legislation and mission, Part III of the Department's Estimates for 1992-93 notes that the principle of sustainable development guides its programs and its dealings with other agencies. It states that the FRDAs are designed to stimulate better forest management by governments and the private sector so as to help ensure the long-term economic viability and international competitiveness of the forest sector and the health of Canada's forests. The agreements generate regional economic and employment benefits. They also provide the federal government with an important instrument to promote increased forest sector activity in support of integrated resource management and sustainable development.

16.71 Given this context, we asked the Department to explain the allocation of funds among FRDAs in relation to its mission. The Department explained that, historically, it has not been responsible for the allocation of these funds and that other priorities, such as regional development, took precedence over sustainable development and competitiveness in these decisions. Through the existing federal-provincial framework of economic and regional development agreements administered by the federal government's regional development agencies, the money for each FRDA was allocated as part of addressing economic development goals for a number of industrial sectors within each province. In the context of promoting sustainable development and competitiveness, we noted anomalies in the relative funding of the FRDAs, particularly when the amount of funding is compared to the relative sizes of the provincial forest sectors (as measured by value of shipments or the amounts of forested lands - see Exhibit 16.6 ).

Identifying sustainable development and competitiveness needs
16.72 We expected that the Department would approach the negotiations of FRDAs by assessing the sustainable development and competitiveness needs within each province. As the basis for the federal position, these analyses would draw on views of the various stakeholders, and would identify and assess local problems, opportunities and other issues within the scope of the agreement. Federal priorities would have been set among issues, and solutions proposed by assessing relative costs and benefits. We also expected the Department to address only those needs consistent with the eight principles guiding federal involvement in FRDAs.

16.73 Managers at the Department's regional establishments indicated that they have good working relationships with colleagues from the respective provincial forestry communities, including the provincial ministries, university forestry faculties, industry, relevant advisory committees and producer associations. However, while the Department's regional staff may be well aware of provincial forestry issues and their significance, this knowledge was not captured in the form of a rigorous analysis of sustainable development and competitiveness needs within the province, nor was one required by senior management of the Department.

16.74 The programs included in the FRDAs we audited were consistent with the eight guiding principles. However, the needs analyses underlying the program structure in these agreements should have been documented and reviewed by senior management of the Department to ensure that the most effective use was made of available funding.

The objectives of the agreements
16.75 Each agreement we examined included a section describing objectives and goals. We expected these objectives to have the following attributes:

  • they would clearly identify intended results;
  • the intended results would be outcome-oriented (i.e., end-product/result) and not input-oriented (i.e., action taken);
  • the intended results would be measurable; and
  • the objectives would be linked to the "needs analysis" for the province.
16.76 In the agreements we audited, objectives were typically expressed in terms of "promote", "contribute to", "strengthen" or "enhance". Such phrasing conveys a general intention but does not specify intended results. In some provinces, we found objectives like "increasing timber supply", but, except for New Brunswick, no quantitative goal was specified. The Department also has not defined the specific results necessary to achieve these objectives.

16.77 We expected that the Department would have undertaken sufficient analysis to be confident that funding allocations to the programs supported by the agreements would maximize potential benefits. However, without clear objectives, it is difficult to know exactly what the individual programs were intended to achieve or how the anticipated benefits compare with the identified needs. It is also difficult to establish definitive links between programs carried out under the FRDAs and the identified sustainable development and competitiveness needs within the province. For three of the five agreements we audited, the Department could not provide us with an analysis showing that it had allocated funding among the programs to maximize the potential benefits. While analyses were done for New Brunswick and British Columbia, they covered only spending on silviculture and had other important limitations ( Exhibits 16.7 and 16.9 ).

16.78 As a consequence, it is difficult for the Department to know the extent to which the objectives of the individual agreements are being achieved. It is also difficult to establish exactly what the Department is accountable for achieving toward promoting sustainable development and competitiveness with the funds it is spending over the five-year life of the current agreements.

Administration of agreement projects
16.79 Our examination of the day-to-day administrative practices of five FRDAs indicates that the programs delivered by the Department of Forestry are well administered. Appropriate program guidelines, policies and procedures have been developed and documented. Existing management information systems are capturing and reporting basic data needed to administer the program. Departmental officials are taking appropriate steps to ensure that work paid for under the agreements is of acceptable quality and that project milestones are adhered to. Annual plans with goals are developed and approved by a management committee, which also reviews operational results.

Reporting to Parliament on agreement achievements
16.80 To assess the quality of information reported to Parliament on the FRDAs, we examined relevant sections of Part III of the Department's Estimates for 1992-93 and 1993-94.

16.81 An appropriate amount of information is included in Part III to describe, in general terms, the nature of the agreements, the significance of the eight principles underlying the agreements, and important basic information for individual agreements, such as the total size, the size of the federal contribution, the date signed and the period covered.

16.82 However, performance-related information needs to be improved. For example, the information provided on "Forest Renewal and Intensive Forest Management", which represents the largest area of expenditures under the agreements (71 percent of the funding), describes the funded activities but does not indicate the resulting effects on volume, quality and cost of the wood supply. Further, statistics that are unrelated to performance are used as performance measures: for example, the number of trees planted (which is not an objective in any of the agreements we audited) or the number of hectares under intensive silviculture treatment (which, by itself, does not provide information useful to measure performance). The report merges performance information from both the current and previous rounds of agreements but says little about the Department's performance in light of its current goals.

16.83 Reporting to Parliament on the FRDAs needs to be improved. Information on results and achievements would be more valuable if it were more outcome-oriented, and if the reporting segregated performance information for the current round of agreements from that of the previous round.

16.84 In its 26 April 1993 budget, the government announced that it would not be renewing the present FRDAs. Nevertheless, during the remaining life of the agreements, the Department should encourage the provinces to develop long-term plans outlining sustainable forest strategies over several decades, as required under the agreements. Also, the Department should provide Parliament with better information on FRDA achievements.

Department's response:

(1) Long-term Plans

The Department is committed to the establishment of long-term forestry plans. As provided for in the Department's guiding forest development principles and individual agreements we will be encouraging the provinces to finalize these plans.

(2) Improved reporting to Parliament

The Department recognizes the need to improve reporting on FRDA impacts and results. Improving forestry data was one of the guiding principles under which the agreements were negotiated. The Department, in co-operation with the provinces and territories, will continue to improve the information available on the forest resource, allowing us to enhance our assessment of FRDA results. As technologies such as Geographic Information Systems (GIS) are enhanced, over time, our reporting will also improve.

16.85 For future forest sector development programs, the Department should:

  • ensure that the programs are based on a rigorous analysis of the relevant needs;
  • set clear and attainable objectives; and
  • ensure that available funding is allocated in a way that maximizes the benefits achievable.
Department's response: The current round of Forest Resource Development Agreements was based on input from a number of sources: assessments of the previous round of agreements; consultations with industry, the provinces, and other stakeholders; and an analysis of various related data and reports. We do, however, recognize the value of a more systematic needs analysis and more precise objectives in order to maximize benefits within each of the agreements. Accordingly, the Department will work toward this end in any future development programs.

Measuring Progress: National Database and Indicators of Sustainable Development

16.86 The National Forest Strategy states that the public has an important role to play in setting objectives, policies and plans for forest management; and to participate properly, the public has to be knowledgeable. The Department of Forestry seeks to inform the public in two ways: first, through the National Forestry Database Program, by which the Department collects and reports information on forests and forest management; and second, through its indicators of sustainable development, reported in the annual State of Canada's Forests reports, which attempt to chart progress toward sustainable forest management.

Establishing a baseline: the National Forestry Database
16.87 The need to capture timely, accurate and comprehensive information on a full range of forest resources has been discussed for at least two decades. More recently, this need has been recognized in the Department's strategic plan, in the Green Plan , in the National Forest Strategy and as one of the eight policy principles that underpin the FRDAs. The Green Plan , in particular, noted that informed debate and wise decisions depended on authoritative information. The National Forestry Database Program, developed under the auspices of the Canadian Council of Forestry Ministers and managed by the Department of Forestry, is intended to address this demand for more complete information. The government, in its response to the 1990 report of the Standing Committee, stated that the database would account for all forest resources in order to mark progress toward sustainable development.

16.88 The Department has not yet significantly expanded or advanced the non-timber information, such as information on wildlife and forest health, collected and reported through the database program. It has, however, focussed on establishing working relationships with the provinces and on resolving accuracy and consistency problems with existing data on timber values. The Department has agreed with the provinces on an initial set of timber-related data, but not on what non-timber information to collect and eventually report. Without this additional information, the database cannot mark progress toward sustainable development.

Measuring progress: indicators of sustainable development
16.89 The State of Canada's Forests 1991 includes a chapter on environmental, economic and social indicators. In order to measure the health and viability of Canada's forests and progress in achieving sustainable development, the Department developed a set of 12 themes that addressed environmental, economic and social values. For each theme, an indicator was selected to represent Canada's performance. According to the Department, "these indicators were based on the best available data, and efforts to enhance and refine definitions and data are continuing." The Department points out that, as a result of this work, Canada has been asked by the Organization for Economic Co-operation and Development to develop some initial forestry indicators for international use.

16.90 We reviewed the process followed by the Department in arriving at the indicators reported in The State of Canada's Forests 1991 , and we examined a sample of these indicators for relevance, accuracy and timeliness. We concluded that the process followed was reasonable inasmuch as it included the establishment of a task force to consult with a variety of stakeholders and experts and to review similar work done by other organizations.

16.91 However, we found that the conclusions reached in the report are not always supported by these indicators. For example, one indicator looks at whether human intervention has changed the forests. It shows that in the Great Lakes-St. Lawrence Region, where white pine used to make up 30 percent of the forest, it now represents only 10 percent: a decline of 67 percent. Similarly, in the Boreal Forest Region, spruce has been reduced by 25 percent, and pine by 50 percent. Yet the report concludes that "the fundamental nature of the forests does not appear to have changed when considered on a regional basis." The report does not explain why sharp declines in important species are not significant.

16.92 A second indicator looks at whether Canada's forests will continue to supply sufficient fibre to sustain the long-term economic needs of Canadians. The indicator uses annual allowable cuts, which are the maximum amounts of wood that may be harvested in a province, to show sustainability of the wood supply. Allowable cuts, which are set by provincial governments, are based on a consideration of biological, social and economic factors. The indicator combines the allowable cuts for hardwoods and softwoods and compares them to the combined actual harvest rates, pointing out that the sum is still 17 percent less than the combined allowable cuts. However, industry relies primarily on softwoods (88 percent of the harvest), and hardwoods and softwoods are not, for the most part, interchangeable. By adding hardwoods and softwood supplies together, the indicator obscures the fact that softwood harvest rates are at the maximum set by provincial governments, and that industry is experiencing shortages of quality raw material (almost entirely softwood) in nearly every producing region. As a result, this indicator is not a good measure of the sustainability of the economic benefits that Canadians derive from their forests.

16.93 The State of Canada's Forests 1991 summarizes information at a regional or national level, making it difficult to discern problems within provinces or forest regions. For example, the national forest account shows national changes in area and volume of the commercial (harvestable) forest. However, the lack of a regional or provincial breakdown obscures the significance of changes over time. The account shows a decrease of 5.3 million hectares in the stocked forest from 1986 to 1989; this is a large area, roughly the size of Nova Scotia. Yet the report, because it presents only large-scale summaries, gives little indication of the significance of the decline. If the intent of the report is to make Parliament aware of forest development problems and issues, it should present information at the level at which problems can be discerned.

16.94 The Department should expand the National Database Program to include non-timber values in order to mark progress toward sustainable development.

Department's response: In working with the provincial and territorial governments to establish the national forestry data base, the first priority was to improve the timeliness and accuracy of the available information, much of which related to timber production. The Department recognizes the importance of improving the information available on non-timber values. To this end, the Department is preparing, with other members of the Canadian Council of Forest Ministers, a strategy for the National Database Program, which will include an assessment of non-timber data. However, the present financial limitations of governments at all levels may slow progress in this area.

16.95 The Department should ensure that conclusions in its report to Parliament, The State of Canada's Forests , are supported by the indicators of sustainable development presented in it.

Department's response: The indicators developed and presented in the Report to Parliament were the first developed by any major forest nation in the world. We remain committed to improving both the indicators and the data required to support them. The Department also remains strongly committed to the principle of providing Canadians with the best information available, and not delaying their access to information as improvements are made.

The Department's intent in the State of Forests report is to provide a national picture of Canada's forests. The Department will make every effort to present information at an appropriate level of detail and to ensure that the conclusions in the report are supported by the information presented. The 1993 report to Parliament provides more detail on annual allowable cuts, and this information is published at a provincial level in other departmental publications.

Making Sustainable Development Operative: The Model Forest Network

Background
16.96 Under the Green Plan , the Department of Forestry has played a leading role in the creation in Canada of the Model Forest Network, made up of working models of sustainable forest management ( Exhibit 16.10 ). These models are designed to expand the range of forest uses and benefits in keeping with sustainable development. The National Forest Strategy states that the model forests should be:

  • based on the management of forest ecosystems;
  • managed to achieve a full range of forest values;
  • open to public participation within a consultative framework; and
  • capable of demonstrating and evaluating new and ecologically sound forest management practices.
16.97 The establishment of the Model Forest Network by the Department of Forestry through five-year contribution agreements has already served an important purpose by providing a mechanism for various groups and agencies to work together in managing forest resources. The participants also see numerous scientific, educational and forest management benefits to come from the model forests.

Planning and financing model forests
16.98 In our review of individual model forest agreements and plans, we expected to find either clear and quantifiable management goals for the sustainable development of a full range of forest values, or at least the commitment to have developed such goals by the end of the five-year contribution agreements. However, we found no explicit recognition of the need to work toward forest management goals, although we did find a commitment in the five-year plans to work toward baseline inventories and indicators of sustainable development, covering timber and other forest values.

16.99 The Model Forest Network was approved by Cabinet with the clear expectation that it would be implemented through formal, contractual, cost-shared partnership arrangements. We found that there are indications that the model forest partners are providing substantial financial and other support. However, the responsibility of the partners to share model forest costs with the Department is not clearly set out in the majority of the agreements signed as of 30 April 1993.

16.100 The Department should encourage the model forest partners to develop and manage toward clear and quantifiable goals for sustainable development of the model forests.

Department's response: All model forest partners, as part of the competition process, were required to demonstrate how their proposals would accelerate the implementation of sustainable development in the practice of forestry. In addition, the Department is assisting its partners in developing and managing toward clear and quantifiable goals for sustainable development of the model forests. To this end, the Department is organizing workshops to develop indicators for inclusion in the annual workplans and reports against which progress can be assessed.

16.101 The Department should clarify the responsibility of its partners to share the costs of the model forests.

Department's response: The Department will strengthen cost-sharing arrangements and encourage all model forest partners to identify in their annual work plans and annual reports all in-kind and financial contributions made toward their respective model forest.