Special Examination Report—Canadian Development Investment Corporation
At a GlanceSpecial Examination Report—Canadian Development Investment Corporation
What we examined (see Focus of the audit)
The Canada Development Investment Corporation (CDEV) is a federal Crown corporation established in 1982 to provide a commercial vehicle for the Government of Canada’s equity investments and to manage the government’s commercial holdings. In 1995, CDEV was directed to wind down its operations by divesting itself of (by selling) its remaining assets. In 2007, however, the Minister of Finance issued a new direction to CDEV. The Minister indicated that it should focus on commercially managing the federal investments that the government had assigned to it. It should also focus on providing advice on government assets as requested by the government while maintaining its capacity to divest those holdings or interests.
CDEV is a parent company with three wholly owned subsidiaries:
- The Canada Hibernia Holding Corporation (CHHC),
- Canada Eldor incorporatedInc., and
- The Canada GEN Investment Corporation.
Our objective for this audit was to determine whether the systems and practices we selected for examination at the Canada Development Investment Corporation were providing it with reasonable assurance that its assets were safeguarded and controlled, its resources were managed economically and efficiently, and its operations were carried out effectively as required by section 138 of the Financial Administration Act.
What we concluded
In our opinion, based on the criteria established, there was a significant deficiency in the Canada Development Investment Corporation’s board appointments, but there was reasonable assurance there were no significant deficiencies in the other systems and practices that we examined. We concluded that, except for this significant deficiency, the Corporation maintained these systems and practices during the period covered by the audit in a manner that provided the reasonable assurance required under section 138 of the Financial Administration Act.
What we found about…
Corporate management practices
Overall, except for a significant deficiency in board appointments, we found that the Canada Development Investment Corporation had good corporate management practices. The significant deficiency related to the fact that the Executive Vice-President had not been appointed by the Governor in Council, despite performing the duties of a president and chief executive officer. We also found weaknesses in four systems and practices:
- board independence,
- risk identification and assessment,
- risk mitigation, and
- risk monitoring and reporting.
This finding matters because well-designed corporate management practices provide a sound basis for decision making. They also support transparency and accountability in how a corporation manages and safeguards the government’s resources and assets.
Recommendation. The Corporation should review its processes to ensure that its conflict of interest policy is being followed, particularly so that declarations are reviewed and disclosures are presented to the Board.
Recommendation. The Canada Development Investment Corporation should comply with the Financial Administration Act requirement for the president and chief executive officer to be appointed by the Governor in Council.
Recommendation. The Corporation should develop a formal risk management policy and framework that supports a consistent approach to identifying, assessing, and monitoring risks, including those of its subsidiaries and its joint arrangements, and define the Corporation’s risk tolerance levels.
Recommendation. The Corporation should formally track, monitor, and report on the status of its risk mitigation activities, including those risks applicable to the Canada Hibernia Holding Corporation that may be mitigated and managed by third parties.
Management of Canada Development Investment Corporation
Overall, we found that there were good systems and practices for the management of the Canada Development Investment Corporation. However, we found a weakness in the operational oversight of the Canada Hibernia Holding Corporation—specifically, that the CHHC did not have the tools it needed to readily track all of its contractual obligations.
This finding matters because the CHHC must ensure that its strategic decisions protect and maximize the government’s investment in the Hibernia offshore oil project.
Recommendation. The Canada Hibernia Holding Corporation should develop practices to formally document and monitor contractual obligations related to its joint arrangements.
Entity Responses to Recommendations
The Corporation agrees with our recommendations and has responded (see List of Recommendations).
|Report of the||Auditor General of Canada|
|Type of product||Special Examination|
|Completion date||28 March 2018|
|Tabling date||6 June 2018|
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