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1998 September Report of the Auditor General of Canada

Main Points

12.1 The federal government is considering the use of alternative service delivery (ASD) arrangements in order to improve service delivery. The Canadian Food Inspection Agency (CFIA) was the government's first legislated service agency; it was created as a departmental corporation and became operational 1 April 1997. Its primary responsibility is to contribute to food safety, plant and animal health as well as to facilitate trade in all areas by providing inspection and related services.

12.2 There was a clear rationale for creating the Agency, including a 30-year history of studies related to reorganizing the federal food inspection system and the government's commitment to a new and better way of delivering services. Senior officials of the three federal departments then involved in food safety inspection supported the initiative to create a single food inspection service. This initiative illustrated that change can be best introduced and sustained when there is a clear rationale that has the support of senior officials.

12.3 The designation of a structured and independent team was crucial to managing the move to agency status. The team's work was separate from the ongoing business of inspections and quarantine activities, so those services could continue without interruption throughout the creation of the CFIA.

12.4 One of the driving forces behind the move to ASD arrangements is their greater flexibility in human resource management. With the move outside the Public Service Employment Act and the change to separate employer status, the shift to a new human resources regime was one of the Agency's greatest challenges. The complexities entailed in creating a new human resource framework as a separate employer need to be recognized and planned for early in the change process.

12.5 In an area of shared responsibility such as food safety, roles need to be carefully defined and mechanisms established to resolve unanticipated problems. The establishment of an accountability framework was a key concern during the creation of the CFIA. Specific responsibilities for food safety were assigned to the Minister of Agriculture and the Minister of Health. Some operational details were still being worked out as new issues arose during the first year of operations.

Introduction

12.6 Since the early 1990s, the government has recognized the need in the public service for greater flexibility, innovation and focus on results. Pressures for change have included the size of both the deficit and the debt, as well as changing public perceptions and expectations about the role and performance of government. Faced with these pressures, the government has been reviewing the programs it delivers. In the process, it has been considering where alternative service delivery (ASD) approaches might be more conducive to efficiency and effectiveness than traditional delivery through departments and, at the same time, more responsive to the needs of Canadians.

12.7 It has used commercialization, for example, to transfer services from the public sector to the private sector, as it did in the sale of the air navigation system to NAV CANADA. The government also uses arrangements with partners outside government, such as private enterprise, community groups and non-governmental organizations. And it is making more use of partnering arrangements with other levels of government; an example is the arrangement with provinces to deliver labour market training. Government has established special operating agencies, such as the Passport Office. In addition, new service agencies are being created: the Canadian Food Inspection Agency (CFIA) is one, and there is legislation pending to establish a Canadian Parks Agency and a Canada Customs and Revenue Agency.

12.8 The government has decided that proposals to establish alternative service delivery agencies would be examined individually, and on a business case basis. The CFIA was the first major service agency legislatively established by the federal government in a very important area, Canadian food inspection and quarantine activities. There is an interest, including within the CFIA itself, in understanding what was learned during the CFIA's establishment and how these lessons can be used by the government as it continues to promote new governance structures through transformations of government programs to alternative service delivery mechanisms.

The Canadian Food Inspection Agency

12.9 The CFIA was established in 1997 by the Canadian Food Inspection Agency Act. It is a departmental corporation with separate employer status, listed in the Financial Administration Act (Schedule II). Its primary responsibility is to enforce standards described in legislation pertaining to food safety and to animal and plant health. It does this by providing inspection services such as registration of processing plants, inspection of domestic and imported foods, certification of exports, and quarantine.

12.10 The Agency is headquartered in Ottawa. It operates programs in all 10 provinces and the territories. The CFIA is moving to a regional structure with four centres of operations and 18 regions across the country. It has about 4,200 staff in 26 area offices, 185 field offices, 408 third-party establishments (such as slaughter establishments) and 22 laboratories and research facilities.

12.11 Prior to the creation of the CFIA, inspection and related services for food safety and animal and plant health were provided by Agriculture and Agri-Food Canada, Health Canada and the Department of Fisheries and Oceans. These three departments transferred about $330 million and 4,500 full-time staff equivalents (FTEs) when the Agency was created. Of the total transfer, Agriculture and Agri-Food Canada contributed over 86 percent, Health Canada just over 3 percent, and the Department of Fisheries and Oceans about 9 percent. Exhibit 12.1 outlines the benefits expected from the transfer of these services to a single agency.

Management and accountability framework
12.12 In keeping with the ASD approach, the CFIA has the flexibility to replace some traditional departmental approaches in managing its mandate.

12.13 Human resources. The legislation created the Agency as a separate employer under the Public Service Staff Relations Act (Schedule I, Part II). Separate employers are part of the federal public service and the employees are still public servants, paid from public funds.

12.14 Separate employers are delegated the authority traditionally assigned to the Treasury Board Secretariat to negotiate collective agreements directly with the unions and establish terms and conditions of employment. In consultation with others, the Agency determines its own compensation and classification systems and work force adjustment and travel policies, among others. It works with unions to explore flexibilities in areas related to terms and conditions of work to better meet industry demands.

12.15 During the first year of operations, the Agency remained under the Public Service Employment Act . On 1 April 1998, it became legally responsible for establishing its own staffing regime, which had the legal effect of moving it out from under the Public Service Employment Act and the staffing regime of the Public Service Commission.

12.16 Finance. Most government departments are funded annually through parliamentary appropriations. The Agency has the authority to spend its annual appropriations over 24 months rather than the traditional 12-month period. It has the authority to spend revenues it has generated (user fees), which represent about 12 percent of its budget.

12.17 Accountability. The accountability regime is a mix of new and traditional approaches to governance. The Agency's regime retains the principles of parliamentary accountability and ministerial responsibility. Two ministers are responsible for implementing the federal food safety program. The Minister of Agriculture is responsible for inspection activities; the Minister of Health sets food safety policies and standards in the area of human health, and assesses the effectiveness of the Agency's related activities.

12.18 The Agency's management authorities are assigned to the President, who is appointed by the Governor in Council for a term not to exceed five years; the appointment may be renewed for one or more terms. Under the Act, the President is accountable for "supervision over and direction of its work and staff", while the Minister of Agriculture is responsible for the "overall direction of the Agency". The President submits to the Minister the Agency's corporate business plan and annual report, which the Minister tables in Parliament.

12.19 The corporate business plan must be prepared at least once every five years. It is to include the Agency's objectives, strategies, expected performance and budget information. The annual report must include audited financial statements, performance information against the objectives established in the corporate business plan, and an assessment by the Auditor General of Canada as to whether the performance information is presented fairly and is reliable.

Focus of Our Study

12.20 The focus of this study was to describe the reorganization of the federal food inspection system and the Agency's progress during its first year of operations. In addition, the study identified a number of useful practices that were employed, and other practices to consider in establishing ASD arrangements.

12.21 Throughout the chapter, we frequently conclude our findings with a useful practice or a practice to consider . Useful practices are those that seem to have worked for the CFIA and that could be considered in other ASD arrangements, taking into account the specific circumstances of each case. Practices to consider are those that might have addressed some identified concerns but were not used in the CFIA case, or were used only to a limited extent. We suggest that they be considered by others involved in a similar move to agency status.

12.22 Further details on the study are found at the end of the chapter in the section About the Study .

Study Findings

Key Factors in the Agency's Successful Creation

Rationale and support
12.23 Long history of identifying reasons to reform the food inspection system. More effective delivery of food inspection services by the federal government was an issue that had been examined in depth for decades. A series of internal studies and task force reviews had pointed to the need to rationalize the Canadian food inspection system.

12.24 Those reviews provided a solid rationale for resolving the long-standing problems associated with the federal food inspection system. The decision to move to a single food inspection system was delayed by concerns about departmental mandates, the lack of necessary resources and questions about the appropriate reporting structure.

12.25 The consensus needed to resolve these issues was not reached until 1995. This undertaking flowed from a number of federal initiatives, including the Program Review exercises, renewed efforts for intergovernmental co-operation and a move toward innovative service delivery. After the government made a commitment in November 1995 to change the existing program, events proceeded very quickly. Exhibit 12.2 describes the milestones in the creation of the CFIA.

12.26 Strong support from senior management was evident. The creation of a single food inspection agency from branches in three government departments required each department to transfer inspection programs and resources to the new Agency.

12.27 Department heads might be expected to protect their own organization and give lukewarm support to a new agency that would reduce their own resources and programs. This was not the case with the CFIA. Commitment by the government and the deputies and assistant deputy ministers involved was strong and consistent, and is considered by many to have been critical to the successful creation of the Agency. Their support was demonstrated through a variety of actions:

  • encouraging co-operation and good working relations among the departments during the implementation phase;
  • providing financial and human resources to establish an independent implementation team;
  • agreeing to key steps in the implementation plan;
  • consistently communicating the strong support the Agency had among ministers and central agency officials; and
  • giving priority to the early creation of the Agency.

Useful Practice: Ensure that there is a clear rationale for change that has the strong support of ministers and senior management.


Transition managed by a structured and independent team
12.28 Following the March 1995 Budget announcement of the decision to review the federal food inspection system, the Office of Food Inspection Systems (OFIS) was established in May 1995 to review organizational options with the three federal departments, industry, the provinces and other stakeholders. OFIS prepared a discussion paper that outlined four possible organizational options; this paper was the focus of stakeholder consultations across Canada. Subsequently, the government decided to create a single food inspection agency. OFIS was responsible for establishing the Agency's framework and preparing for the start of business.

12.29 Throughout the period leading up to the creation of the CFIA, there was a strong commitment by OFIS and the parent departments to separate the work of the implementation team from the operations of the three affected departments. In this way the process of creating a new agency would not interfere with operations, and would ensure the continuity of food safety and quarantine programs. As a result, during the implementation period the inspection program continued to be delivered as before, and the implementation team was free to focus on creating the Agency. Exhibit 12.3 describes the structure used by OFIS. Two of the components of the implementation structure were OFIS and the ``Group of Seven":

  • OFIS co-ordinated the changes required to move to the new Agency. It comprised 11 full-time professionals with experience in the three affected departments, in some central agencies and at the provincial level. The executive director of OFIS was the main conduit for communication with the central agencies and, in particular, the Privy Council Office. OFIS implementation teams were formed to cover the areas of human resources, accountability, financial management, and communications. Moreover, there were 20 additional subcommittees to work with the implementation teams, involving over 170 individuals.
  • Group of Seven was the intermediary body that acted as a co-ordinating group. It was a consensual decision-making body chaired by the senior advisor of OFIS. It comprised the leaders of the four OFIS implementation teams and representatives from the three departmental committees, who acted as conduits between OFIS and their home departments.

Useful Practice: When it is essential to maintain uninterrupted service delivery, establish an implementation team structure separate from ongoing business. Ensure that the interests of the major affected organizations are represented on the team.


12.30 Timing of appointments is key. In creating a new organization, a key decision is when to appoint its chief executive officer. The appointment of a president-designate could be made at any time from the announcement of the intention to establish the entity until legislation is passed and the organization is up and running. On one hand, an early appointment provides a focus for decision making and allows the new senior executive a chance to shape the organization to his or her vision. On the other hand, in strained or particularly difficult circumstances an early appointment could exacerbate any disagreements among the affected departments and reduce the incentive to co-operate with the new appointee. As well, it could limit the effectiveness of the consensual approach adopted by the implementation team.

12.31 Senior government officials and OFIS members discussed the timing of the appointment of the Agency's President. The President and Vice-President were first named as designated heads in February 1997 and then appointed on 1 April 1997, when the Agency began operations. This timing did avoid potential disagreements among the three affected departments, but there was a consequence: during the implementation process, there was no individual exclusively representing the needs of the future Agency in negotiating the allocation of assets.


Practice to Consider: Ensure that the needs and interests of the new organization are adequately represented prior to the appointment of the president or chief executive officer.


Consensual approach to decision making
12.32 The decision-making approach adopted by OFIS, the Group of Seven and the implementation teams was consensual. This approach was supported by OFIS management and facilitated by the fact that teams were non-hierarchical and generally worked collaboratively toward agreed goals. When consensus could not be reached, the issue was moved up for decision by the involved assistant deputy ministers - something that occurred only a few times.

12.33 This approach generated the broad discussion and debate that ultimately led to the key recommendations and decisions made in the implementation period. OFIS team members left their "departmental jackets" at the door and this, along with the consensual approach, helped them develop a collective understanding of their purpose - to develop the best framework for the Agency.

12.34 Some limitations to the consensual approach. In our interviews, some members of OFIS indicated that a consensual approach was not useful when dealing with controversial issues under pressures of a short time frame. These pressures often forced teams to work on issues as they arose, rather than on other important matters with long-term implications, such as the development of the corporate business plan, the employee classification system and the organizational structure.


Useful Practice: Encourage a consensual approach to building an operating framework for a new agency. This facilitates the involvement and buy-in of all participants, which is important when several organizations are involved. However, resolution of more controversial issues might be deferred in a situation of a compressed time frame.


Expertise in creating a new agency
12.35 Dedicated resources working together are required to carry out the work of setting up a new organization that has the flexibilities offered the Agency. While no blueprint exists for creating agencies outside the traditional departmental structure, there is considerable experience on which to build. For example, at present over 20 organizations have separate employer status. The federal government has also created new organizations by transferring programs from several other departments, as it did in the case of the Canadian Space Agency, and other jurisdictions in Canada have established many agency-type organizations. We would expect that the expertise thus acquired would be sought out and used.

12.36 Limited ASD expertise on the implementation teams. Generally, those involved in the implementation process were at fairly senior levels in their departments and, in many cases, had strong technical or functional backgrounds that were relevant to the work involved in the implementation. However, their experience was generally limited to working within government departments and implementing existing policies. Few members had experience in setting up new organizations and establishing policies to reflect management and administrative flexibilities in keeping with the ASD approach.

12.37 Limited use of outside expertise. ASD arrangements need administrative regimes that are much more flexible in their design and operation. Drawing on relevant outside experience, whether from other government jurisdictions or the private sector, can provide important lessons and facilitate the implementation process.

12.38 Implementation teams carried out most of their work in-house. Few external experts were brought in to provide complementary conceptual or technical assistance in the implementation process, but those who were called upon did have relevant experience.


Practice to Consider: Make good use of experience and expertise from outside federal departmental administration when setting up new organizations with flexibilities beyond those of traditional departmental structures and central policy regimes.


Impact of compressed time frame
12.39 A tight time frame was imposed on the implementation team. It had only 13 months, from the March 1996 Budget announcement until the legislation received royal assent in March 1997. This tight time frame presented benefits and challenges. In our interviews, team members often noted that the time frames generated tremendous pressure on work teams and limited their time for dealing with difficult issues. For example, on 1 April 1997, many Agency systems were not yet in place, including financial and human resource systems. By 1 April 1998, the transition process was still under way for the corporate management groups, which were increasingly occupied with delivering services while still having to develop internal policies and processes.

12.40 A deliberate decision was made to leave the details of the financial transfers and the human resource framework until after the launch of the new agency. This led to a phased-in approach. Issues and details that could not be resolved before the legislation was passed and that were not crucial to the legislation were deferred.

12.41 At the same time, the tight schedule certainly focussed attention on the task at hand and kept up the pressure to deliver the Agency on time. Given the narrow window open in the parliamentary agenda as well as a pending election, there was real concern that taking time to resolve all issues would mean having no agency at all.


Useful Practice: Implement a new agency through a phased-in approach as a way to deal with tight time frames. This allows implementation to proceed on time, even when there is insufficient time to deal with all issues or when complete agreement on all aspects of the agency has not yet been reached. However, unresolved issues can take significant effort to settle later on.


Effective communication and consultation about change
12.42 OFIS and the parent departments communicated throughout the implementation to ensure the involvement and support of working-level personnel, as well as other interested parties including consumers, industry and foreign governments. Communication initiatives were viewed as a success by many stakeholders and staff involved in, or affected by, the implementation process. Our own study largely corroborates this view.

12.43 During our interviews, staff confirmed that OFIS and the parent departments had provided them with sound information. While they considered that the information provided was honest, there was often little information to share, given that many decisions were left until later. The fact that OFIS and parent departments were still able to marshal staff support and maintain trust throughout this organizational change is a major indicator of the success of the communication exercise.

12.44 Consultation with stakeholders was undertaken and was integral to the development of the Agency. In 1995, for example, OFIS used a consultative process to elicit comments and ideas about organizational options for reorganizing the federal food inspection system. Based on extensive consultations with the three federal departments, industry, provinces, and other stakeholders, the government opted for the creation of a single agency.

12.45 Throughout the implementation period, there were efforts to consult with affected groups prior to making decisions. The implementation team's firm commitment to an extensive process of consultation has been widely recognized.


Useful Practice: Implement a communication strategy that incorporates consultation as a meaningful tool to involve employees and stakeholders - a key element in the successful implementation of a new service agency.


Key Challenges

Transfer of program and corporate assets to the new Agency
12.46 The process of identifying and allocating resources to the new Agency from the three affected departments proved to be complex and time-consuming. The new Agency would need to receive sufficient resources to establish a solid basis for fulfilling its mandate, including inspection resources, corporate overhead and physical assets such as buildings and laboratories. Similarly, the contributing departments had to be left with appropriate resources to deliver remaining programs.

12.47 A number of factors in the CFIA experience affected the transfer process:

  • It was a two-staged implementation - the realignment of Health Canada and Agriculture and Agri-Food Canada program components in June 1996, followed by the transfer of the Fisheries and Oceans and Agriculture components to the Agency on 1 April 1997.
  • The inspection components in Agriculture and Agri-Food Canada and the Department of Fisheries and Oceans were largely self-contained and separate from other operations in those departments.
  • Given the scope and complexity of Health Canada's planned laboratory rationalization, a decision was made to defer the distribution of corporate and physical assets related to facilities until after the Agency's creation.
  • All parties recognized the need to maintain long-term working relations.
12.48 A structured approach was used to transfer program resources. The accountability implementation team prepared an exhaustive list of the 51 federal activities in the three departments associated with food safety policy and standard setting, food inspection, and quarantine. As well as identifying who would become responsible for each activity on 1 April 1997, this accountability matrix was used to clarify shared roles and responsibilities. It was also used in deciding on the transfer of program resources. With the transfer of each activity, the transfer of program dollars followed. Based on the agreed responsibilities, the accountability implementation team then allocated these activities to either the Agency or Health Canada.

12.49 Fixed assets were not valued, partly because the creation of the CFIA was not a sale of assets. Beginning with the fiscal year 1999-2000, the Agency intends to report its financial results using generally accepted accounting principles. At that time, it must value its assets. The task of valuing assets is difficult for any government entity, particularly when inventory records are incomplete or outdated. The Agency does not have a complete list of its assets. Given that the inspection programs transferred from parent departments were largely self-contained, however, all fixed assets such as laboratories, cars and equipment followed the program dollars and staff moving to the CFIA.

12.50 At the request of OFIS, the three departments hired an outside accountant who reviewed the figures used in the transfer process. Participants confirmed that this, coupled with sign-off on the accountability matrix by the Assistant Deputy Minister Steering Committee, enhanced credibility and added discipline and rigour to the process of transferring program resources.

12.51 The human resources implementation team developed criteria to identify those who would move to the Agency. Individuals who devoted 60 percent or more of their time to inspection services were designated a dedicated resource and were transferred. In some cases, non-dedicated staff (those devoting less than 60 percent of their time to inspection programs) were given the option to volunteer for transfer to any vacant positions. In other cases, transfers of staff were not feasible from the perspective of the parent department, and so dollars were transferred instead. This approach was not used to identify staff when they belonged to largely self-contained inspection units.

12.52 Division of corporate resources was difficult. The transfer of corporate resources was, however, difficult and continued to create problems for the Agency in the first year of operations. Many factors contributed to the difficulties. First, corporate staff are often multi-tasked and not easily separated from the parts of the organization that are not being transferred. Second, the implementation team did not use an agreed formula or methodology. OFIS proposed a formula based on a 1995 study that had been commissioned to project cost savings possible through a single-agency delivery system. However, there was no agreement to use this study in deciding on the allocation of corporate assets from the contributing departments to the Agency.

12.53 The absence of decisions about the future management structure of the Agency made discussion about a corporate structure difficult. No formal analysis of the Agency's corporate requirements was carried out. As noted already, there was no designated individual representing exclusively the Agency's interests to negotiate the transfer of corporate assets and ensure that the Agency would have enough resources to fulfil its mandate. Finally, the outside accountant who was hired to oversee the figures used in the transfer of program resources did not play a significant role in the division of corporate assets.


Useful Practice: Based on a needs analysis, establish a framework or formula to identify both program and corporate resources to be transferred from existing organizations to a new agency and ensure that there is commitment to transfer resources according to the formula.


Establishing a new human resource management regime
12.54 The CFIA experience demonstrated that this was a challenging but critical area.

12.55 Implementation team focussed on options for the human resource regime and on the transfer of staff. These were the primary preoccupations of the human resources implementation team. Following consultations with all stakeholders and discussions with the Treasury Board Secretariat, OFIS recommended that the legislation establish the Agency as a separate employer under the Public Service Staff Relations Act and outside the staffing regime of the Public Service Employment Act .

12.56 The change to separate employer status and the move outside the staffing regime of the Public Service Employment Act were new territory for many involved in the creation of the Agency. The operational implications of this new status were not fully examined during the implementation phase; this was deliberately delayed until the first year of operations. As well, few members of the human resources implementation team or working groups became employees of the new Agency, which resulted in the loss of much of the corporate memory that had been developed during the implementation period.

12.57 The work and communication efforts of the human resources implementation team as well as those of the parent departments led to over 99 percent of employees accepting an offer of employment with the Agency.

12.58 Creating and implementing the Agency's human resource framework required time and resources. In the Agency's first year of operations, a human resource strategy was developed in consultation with employees to support the CFIA business plan. The strategy outlined the key challenges facing the Agency in the next three to five years and was supported by a detailed work plan. As well, the strategy included a comprehensive set of values that governs the management of people in the Agency. These values serve as the foundation for human resource decisions, given that the Agency moved outside the Public Service Employment Act .

12.59 Once established, the Agency recognized the time and resources required to establish its human resource framework as a separate employer, and the full complexity of the task. This resulted in a number of challenges, including the following:

  • Mobility for CFIA staff within the public service was a concern. To facilitate mobility, the Agency established memoranda of understanding (MOU) with the parent departments for the inclusion of CFIA staff among those they consider when staffing positions. We note that closed competitions under the Public Service Commission's staffing regime are potentially open to all persons in the federal public service, including the Agency. Access to specific competitions in departments is determined by deputy heads, who have been delegated the Commission's authority to establish areas of selection in accordance with the Commission's policy and the terms under which the authority was delegated.
  • When the Agency started operations, its Labour Relations unit was largely vacant until a Director was hired to head the unit in the fall of 1997. The Agency was faced with numerous tasks, including responding to notices to bargain with existing bargaining agents. Over the past year, the Agency worked with unions to define a new bargaining structure that reduced the number of bargaining units from 27 to 4, and also made significant progress in negotiating new collective agreements.
  • The CFIA decided in March 1998 to adopt the Universal Classification System developed by the Treasury Board Secretariat. The Agency planned to modify the Secretariat's system to suit the Agency's requirements. The full roll-out of this classification system can be expected to be a lengthy and challenging process, but it may facilitate the integration of inspection functions from the three departments.

Practice to Consider: Recognize early on that establishing a new human resource management framework as a separate employer is a complex task. A new framework requires time and resources to design and implement.


Early implementation of the accountability framework
12.60 The accountability framework is still to be tested. We reviewed the accountability framework set out in the Act and related documents.

  • Roles and responsibilities are set out. The sorting out of roles and responsibilities was a key concern of the accountability implementation team. The team developed an accountability matrix that identified activities involved in the federal food inspection system. In addition, it identified any overlap and duplication of inspection services among the contributing departments. In this way, the team and the parent departments arrived at a common understanding of future roles and responsibilities of the key players.
In the area of food safety, the Act assigns roles and responsibilities to the ministers of both Health and Agriculture. The Minister of Health is responsible for establishing policies and standards related to the safety and nutritional quality of food. The Minister of Agriculture, through the Agency, is responsible for implementing those policies and standards; this includes the provision of all federal food inspection activities. The Minister of Health is responsible for assessing the effectiveness of the Agency's activities that relate to food safety. Thus, the legislation provided a check and balance for shared responsibilities in this complex area.

The legislation does not describe roles and responsibilities further. However, in one particular case, a memorandum of understanding between Health Canada and the Agency has been signed to outline roles and responsibilities and establish a working relationship in the area of food safety emergencies and related activities. In this way, the Agency and Health Canada have established a mechanism for clarification of roles and responsibilities. It is understood that roles and responsibilities will be reviewed further as the accountability framework continues to be used.

The Act gives the President of the Agency the authority to delegate power to "any person". This means that enforcement powers under the Act can be delegated to third parties, thus expanding the range of accountability. However, the Agency remains accountable to the Minister of Agriculture and ultimately to Parliament for the exercise of this power.

The clarity and effectiveness of these arrangements in the accountability framework still need to be tested as new events occur over time.


Useful Practice: Before establishing a new ASD arrangement, identify as clearly as possible the roles and responsibilities of the key players, especially in the areas of shared responsibility.


  • Review and adjustment mechanisms being developed. The legislation does not provide any formal review mechanisms to settle disagreements that might arise in matters of shared responsibilities. It is up to the Agency and Health Canada to establish policies and protocols as needed to ensure co-ordination of their shared responsibilities. Some steps in this regard have been taken, as described above. In the area of food safety and recall, the Agency and Health Canada have a shared responsibility. They have signed a memorandum of understanding that provides for an annual review, the first of which resulted in a planned amendment to clarify procedures for the investigation and recall of food-borne matters that potentially can cause illness.

Practice to Consider: For new ASD arrangements that involve shared roles and responsibilities, establish specific procedures to resolve disputes and disagreements that may arise among the parties.


  • Performance expectations not yet known after one year. In stating the government's objectives for the Agency, the Act provides only overall direction. The Agency's objectives, strategies and expected performance over that period are presented in its corporate business plan.
The corporate business plan was tabled one year after the creation of the Agency, in May 1998. It was based on extensive consultation, and reflects the needs of managers, clients and stakeholders. While the Agency's expected outcomes listed in the plan are results-oriented, they are not sufficiently concrete or precise to provide a good indication of what is to be achieved.

  • Balancing expectations and capacities. It is perhaps too early to know if the transfer of assets from the three departments has achieved the right balance between resources and expectations. Concerns may yet be raised, for example, as to whether the transfer has left the Agency and the contributing departments with the appropriate resources to fulfil their respective mandates.

  • A credible reporting regime. The reporting regime of corporate business plans and annual reports established in the legislation is sound. It has been strengthened by the Auditor General's role in providing an opinion on the Agency's financial statements and in assessing the performance information reported against the Agency's objectives. Although the Agency has been slow to develop its first annual report, due in the fall of 1998, it is beginning to implement a new results-based management framework. When implemented, this framework should provide a solid basis for reporting performance.
Role of central government agencies in the creation of the new Agency
12.61 A number of central players were involved in the creation of the CFIA. The Privy Council Office was involved in decisions on the structure, organization and ministerial responsibility and accountability for the Agency. In addition, the Privy Council Office was, in the CFIA's policy context, concerned with policy and administrative issues related to intergovernmental relations, government renewal and strategic national priorities. Similarly, the Treasury Board Secretariat, acting on behalf of the Treasury Board, provided advice on good public management from a whole-of-government view, and in particular on agency-specific concerns in the areas of financial and human resource management. The Department of Justice supported this initiative by playing its key role of providing legal advice and legislative drafting services. The Public Service Commission was consulted with respect to staffing issues that were expected to arise in the transition from departmental status to agency status.

12.62 Although there was no established blueprint for such an initiative, as is in keeping with the case-by-case approach adopted by the government, we would nevertheless expect that the central agencies would provide adequate and consistent guidance based on previous experiences with ASD-type initiatives.

12.63 Legal creation of the Agency. In order to meet the government's deadline for tabling, the legislation had to be drafted by September 1996, six months after the Budget announcement to establish the Agency. It was during this period that the role of central agencies became critical to ensuring that the commitment to the schedule was met and that sufficient resources were available for the drafting process and related matters.

12.64 For an intense six-week period, drafters from the Department of Justice worked to produce a draft of the Act. Individually, few components of the Act constituted a radical departure from the norm; but the whole was sufficiently different and complex that it required more work than a typical piece of legislation. Legal advice and legislative drafting services were co-ordinated by Justice in the areas of human resources law, expenditure management, and Crown law, among others.

12.65 Clear direction needed from central players. The establishment of new alternative service agencies was new territory for both the Treasury Board Secretariat and OFIS. At the same time that OFIS was seeking advice, the Secretariat was developing its own capacity to support the move to new alternative service delivery arrangements in a number of its policy centres. The Secretariat has informed us that it provided a wide range of support for the creation of the Agency. However, OFIS has told us that it did not always obtain clear and consistent advice and direction, particularly in the areas of human resource management and reporting requirements.

12.66 In light of the trend toward establishing ASD arrangements, and given the CFIA experience, the Treasury Board Secretariat conducted an internal study to analyze the role played by the central agencies and identify lessons learned for the launching of future government initiatives in alternative service delivery. One of the lessons identified was the need for a central agency presence and for individuals within the central agencies to visibly support the move to a new organization. The Secretariat has understood this need and has taken steps to ensure that it provides strategic and consistent advice to teams implementing new ASD proposals. In our view, that study was a positive step to identify key lessons from the CFIA experience that could be used in preparing for other government ASD arrangements.

12.67 The Public Service Commission is responsible for the application of the merit principle through the administration of the Public Service Employment Act . It had limited involvement in the creation of the Agency. As a separate employer that has authority to appoint its own staff, the Agency becomes solely responsible for maintaining core public service values.

12.68 With respect to the provision of legal advice by lawyers from Justice, there appears to be some uncertainty about how to best serve the needs of an emerging entity. The departments and central agencies involved in the creation of the Agency each had Justice lawyers ensuring the representation of their interests. However, several participants we interviewed pointed to the absence of similar legal representation to look out for the interests of the future agency.


Practice to Consider: Make it standard practice, given the government's case-by-case approach to establishing ASD arrangements, to bring together and provide the best advice possible to new agencies being set up, and make sure that the lessons learned in each case are well documented and communicated.


First Year of Operations

12.69 We have discussed the establishment of the CFIA, which occurred over the 13 months from March 1996 to March 1997. For the subsequent 12-month period, that is, between 1 April 1997 and 1 April 1998, the focus of our study was on the progress made by the Agency toward establishing its organizational structure, maintaining inspection systems and practices, and developing financial systems.

12.70 Ongoing development of the Agency. There are numerous approaches to establishing a new organizational structure. It can be done early, as soon as the new organization has been formed; or, as in the case of the CFIA, it can be done in a more incremental manner. In both cases, a certain amount of anxiety will be created.

12.71 During the first year of operations, staff were uncertain about their future roles and responsibilities and concerned about their employment status once their two-year job guarantee expires on 1 July 1999.

12.72 In April 1998, based on the recommendations of management working groups, the Executive Committee announced a new organizational structure that realigned functions at all levels of the Agency. The development of the Agency's organizational structure had been a lengthy process because the creation of the Agency was not only a consolidation of inspection services from three government departments. It also involved the creation of an organizational structure that would support the management of the transition to a number of new approaches. These included separate employer status; financial systems and practices in accordance with generally accepted accounting principles; performance reporting; and finally, a risk-based approach to food inspections. The challenge was to embrace all of this in an organizational and management structure, while ensuring the continuity of the inspection program. Nevertheless, there was a significant amount of frustration among staff who were expecting more and faster change.

12.73 Throughout the establishment of the CFIA, inspection operations generally remained unchanged; inspection systems and procedures used before April 1997 were largely maintained during the first year. The Agency ensured that trade with international partners continued without interruption. Important industry-related changes that had been occurring before the Agency's creation continued to be implemented. Now the Agency is also moving ahead with its commitment to work toward an integrated system of food inspection based on the harmonization of standards with provincial, territorial and municipal governments.

12.74 Financial systems and practices being developed. Before 1 April 1997, there was no formal analysis of what would be required of the Agency's financial systems at the start of business. The Agency started operations with few resources in its financial function and without its own financial systems and practices. During the first year of business, most of the financial staff came from Agriculture. The Agency had signed memoranda of understanding with the three parent departments for financial, informatics and/or administrative services. It had also opted to share a number of services with Agriculture and Agri-Food Canada through memoranda of understanding. This was a deliberate decision intended to cause minimal disruption and avoid duplication of existing systems and practices.

12.75 The Agency has taken an incremental approach to preparing its financial statements in accordance with generally accepted accounting principles (GAAP). It has been working on developing its financial reporting systems to reflect its operational requirements, and on making certain that appropriate financial and management systems are in place before the shift is made. In its recently issued corporate business plan, the Agency stated its intention to move to full accrual accounting for 1999-2000. This will be important to:

  • provide users of the statements with a complete report of the Agency's operating costs, its resources and its obligations;
  • present the results of its operations in a manner that matches outputs to the resources used to achieve those results; and
  • facilitate improved financial management and controls.
12.76 There were consequences of adopting an incremental approach. On the positive side, operational managers continued to receive financial reports in the format to which they were accustomed and financial staff were able to use familiar systems and practices. This contributed to minimizing unnecessary disruption and to maintaining a more consistent control environment. It also minimized the number of overall changes occurring throughout the Agency during the first year of operations.

12.77 However, this approach limited the extent to which significant advancements in financial management and reporting could be made in the Agency's first year of operations; for example, its first financial statements will not include a balance sheet showing its assets or its liabilities. The Agency also continued to have difficulty providing data to support its user fee charges that would meet industry's expectations. Further, with the delay in finalizing an Agency financial function, there was some apprehension among regional financial staff about their future within the Agency.


Practice to Consider: Early establishment of a well-defined financial function increases a new agency's capability to manage its new financial flexibilities from the outset of operations.


Conclusion

12.78 Our study focussed on two stages: the successful creation of the Agency with the passage of the enabling legislation; and its first year of operations. The first stage of the reorganization was completed in a compressed time frame. Early in the process, senior government officials established a timetable. The implementation team, senior departmental officials and the central agencies maintained momentum for change. The legislation was passed on schedule, 13 months after the Budget announcement. The support and dedicated resources ensured the successful creation of the Agency.

12.79 The CFIA faced a number of challenges in setting up its management framework to operate as a new service agency. It has had to consolidate programs from three departments and work on the configuration of a new organizational structure; it has been co-operating with Health Canada and with other levels of government to streamline inspection programs nationally; it has been developing its own identity and culture as an agency. The Agency has also worked to meet the expectation that it would be more innovative, flexible and efficient in the delivery of services. The Agency has had to do this under pressures of time and, more significantly, while ensuring the continuity of food safety and quarantine programs.

12.80 Many demands lie ahead. The Agency has the legislative authority to operate with greater autonomy and flexibility. The real challenge is to use this new flexibility to meet the government's commitment to a new and better way of delivering services. The concern is that the longer the Agency takes to create systems and practices that reflect its powers, the more it risks falling back into traditional ways of doing business.


About the Study

Scope

We focussed our study on two periods of time: the implementation period starting with the Budget announcement to create the Agency, March 1996, until the passage of the enabling legislation, March 1997; and the first year of operations, April 1997 to April 1998. We reviewed key factors and challenges during the implementation period. In addition, we examined the first year of operations in relation to the Agency's organizational structure and systems and practices. This was a case study of one government transformation of services to an ASD agency.

Objective

The objectives of this study were to:

  • describe the reorganization of the federal food inspection system;
  • describe the Agency's progress during its first year of operations; and
  • identify practices to consider in ASD arrangements.
The study did not include an assessment of the Agency's performance. Rather, it was a case study of a move to a legislated service agency. Although we identified a number of sound practices in this particular case, their applicability to other ASD arrangements would depend on the circumstances.

Approach

Our findings and conclusions were based on extensive interviews with the players involved in the Agency's implementation period and its first year as an agency. We reviewed available written materials on the experience and made numerous site visits.

Study Team

Assistant Auditor General: Maria Barrados
Principal: John Mayne
Director: Patricia MacDonald

Christina Brooks
Adèle Lamoureux
John Rossetti
Frances Smith
Gordon Stock

For information, please contact John Mayne.