CANADIAN COUNCIL OF PUBLIC ACCOUNTS COMMITTEES
TASK FORCE ON CROWN CORPORATION ACCOUNTABILITY
At the August 1991 meeting of the Canadian Council of Public Accounts Committees in Winnipeg, a Task Force was formed through the adoption of the following motion:
"That the Canadian Council of Public Accounts Committees establish a task force to examine the role of the public accounts committee and other legislative committees in the accountability process of Crown corporations with a view to generating a statement on this issue for the information of member-jurisdictions and to assist the CCPAC in future discussions in this matter, and to report back at the next meeting of the CCPAC."
The Task Force is composed of the Chairperson of each of the Public Accounts Committees of the House of Commons, the Legislative Assembly of Manitoba and the Legislative Assembly of Saskatchewan as well as the respective Clerks of those public accounts committees.
The Task Force surveyed all jurisdictions to gain a better understanding of the current modus operandi of the PAC's and other legislative committees in different jurisdictions vis-a-vis Crown corporations accountability. For this purpose, a questionnaire was developed and sent in December 1991 to each of the Chairpersons of Public Accounts Committees in Canada. An analysis of the results is provided in the following material.
It should be noted that in some jurisdictions there are different definitions for various levels of corporate ownership and control and that the above-noted definitions may not have been adhered to in all cases.
1. All jurisdictions responding have commercial Crown corporations (a total of 216 entities) as well as departmental Crown corporations (a total of 100 entities). About half of the jurisdictions also have mixed Crown corporations (a total of 33 entities) and portfolio Crown corporations (a total of 50 entities). The number of corporations identified is not an accurate representation of the total because two responding jurisdictions did not provide this information.
2. Because of different classification approaches, it is difficult to obtain a precise representation of the order of magnitude of these entities. However, while departmental, mixed and portfolio entities each represent less than 20% of total government expenditures, commercial Crowns represent a more significant proportion of total government activity.
3. Most jurisdictions (seven of ten reporting) have a formal accountability framework established through legislation for departmental and commercial Crown corporations. No jurisdiction maintains a legislative regime for Mixed or Portfolio corporations although one provides a framework through policy and administrative means.
4. In all cases, those responding indicate that departmental and commercial Crowns are accountable to a Minister. Six out of the ten responding indicate that these corporations are also accountable to the government (e.g., cabinet committee) and nine indicate accountability to the legislature.
5. While the legislature can create, acquire or dispose of parent corporations in all jurisdictions, the government can do so without legislative approval in only six of ten cases.
6. Subsidiaries can be created, acquired or disposed of by parent commercial Crowns with government approval in all but one jurisdiction (which requires the approval of the legislature) and in seven of ten jurisdictions for departmental Crowns. Of those nine jurisdictions, only two require that the legislature be advised of the rationale and objectives of such action.
7. In most jurisdictions, members of the Board of Directors of departmental and commercial Crown corporations, as well as the Chief Executive Officers, are appointed by the government (through Orders in Council). In the majority of jurisdictions, Ministers or other elected officials may sit on the boards of departmental and commercial Crowns. The remuneration for the Chief Executive Officers of these entities is usually set by the government.
8. In six of the jurisdictions, the Board is actively involved in the day-to-day management of departmental and commercial Crowns, while in four other jurisdictions, the Board is not so involved. Management's responsibilities are outlined in legislation in five jurisdictions for commercial Crowns but in only four jurisdictions for departmental Crowns. In only four jurisdictions is there a legislative requirement that directors are to act in the best interests of the corporation and its mandated objectives.
9. In all but one jurisdiction, there are provisions for the government to issue directives to corporations (except for Mixed and Portfolio corporations) but in only one jurisdiction, is there a requirement to table the directive in the legislature or otherwise make it public once issued.
10. The contents and purposes of plans and budgets are not widely prescribed by legislation or administrative mechanism. In only six of the ten jurisdictions, annual corporate plans, operating budgets, capital budgets and a report on annual performance are requred to be prepared for departmental and commercial Crowns. In the majority of cases, the operating and capital budgets require approval by government; in only four cases does the annual corporate plan require the approval by government. In only one jurisdiction is the legislature provided with a copy or summary of the annual corporate plan. In five jurisdictions, the legislature is provided with a copy or summary of the operating budget and in six, a report on annual performance; in only four jurisdictions is the capital budget provided to the legislature.
11. The auditors of departmental and commercial Crowns are appointed through legislation by governor in council in most cases. In those cases where an auditor other than the legislative auditor is appointed, there is a review or oversight role for the legislative auditor in six jurisdictions.
12. Internal audit in departmental and commercial Crowns is required by legislation in only one jurisdiction. Two jurisdictions require the establishment of audit committees of the boards.
13. While in six jurisdictions the legislation prescribed matters to be addressed and reported upon by the (external) auditor of the financial statements of departmental and commercial Crowns, in only four jurisdictions is there a requirement for a periodic audit of compliance with legislative authorities, and in only three jurisdictions is there a requirement for periodic audit of economy, efficiency and effectiveness (value for money).
14. Eight jurisdictions prescribe the requirement to table in the legislature an annual report on the activities and results for the year just completed. Two jurisdictions require commercial Crowns to table in the legislature an annual report on the performance related to objectives for the year and three jurisdictions prescribe the contents of the annual reports to be tabled. Two jurisdictions require departmental and commercial Crowns to report annually on compliance with legislation and Crown directives.
15. While many jurisdictions do not require, through legislation, a number of the above noted items, they may be prescribed in some cases by way of administrative policy or order in council. In general, there are few jurisdictions which require the automatic tabling and referral to legislative committees of such documents as plans and budgets, directives or reports (annual or audit).
16. With a few exceptions, departmental and commercial Crowns are required to provide information and explanations, if requested, to the legislature, the government or to the auditor.
17. While the majority of jurisdictions believe that there is control over the creation, acquisition or disposal of commercial and departmental Crowns, the majority do not feel that respective roles and responsibilities of the legislature, government, the Crown corporations and the auditors are well defined and understood by all. An independent assessment of the adequacy of the accountability framework is not provided by auditors in half of the jurisdictions.
18. A small majority believes that audit is sufficiently comprehensive to ensure compliance and coverage of "other matters".
19. In the majority of jurisdictions (seven out of ten), it is felt that the legislature is not provided with information to enable the determination of whether departmental and commercial Crowns have achieved their objectives. In only four jurisdictions does the accountability framework provide information mechanisms for legislative committees (including PAC) so that they clearly understand their roles and the interrelationships of the various parties.
20. In general, the PAC plays a limited role with respect to Crown corporations. In only two jurisdictions does the PAC review the activities (e.g., arising out of budgets, corporate plans, reports, etc.) of each departmental and commercial Crown.
21. In only one jurisdiction are the annual reports of departmental and commercial Crowns referred to the PAC. In five jurisdictions, the PAC terms of reference do not encompass all Crown corporation issues.
22. In seven jurisdictions the PAC does not scrutinize the divestiture/creation processes.
23. In all jurisdictions responding, the PAC is not involved in the appointment of board members nor in the appointment of auditors and the audit reports of the external auditors are not referred to them.
24. Half of the jurisdictions consider they have access to all the information needed for scrutiny of Crown corporations.
25. While the PACs tend to play a limited role with respect to Crown corporations, other legislative committees are involved more extensively. For example, other committees have the authority in a majority of cases to review issues and matters respecting divestitures, plans and budgets, annual reports, audit reports and other information even though a majority of jurisdictions do not maintain standing committee review and oversight.
26. In only two jurisdictions, is there the view that there is adequate coordination among legislative committees to ensure coverage of departmental and commercial Crown corporation matters.
27. In all jurisdictions but one, there is the view that the debate of supply alone, relating to Crown corporations, does not adequately address issues of interest to various legislative committees.
28. Four jurisdictions feel that all Crown corporation issues, subject to legislative consideration, should be dealt with by a single legislative committee; six jurisdictions do not support this approach.
29. In all jurisdictions, there is agreement that all Crown corporations should be subject to legislative committee scrutiny and that there should be specific criteria considered by various legislative committees in their review of Crown corporations.
30. Eight jurisdictions support the view that legislative committees should examine all aspects of corporate management in addition to fulfilment of corporate and policy objectives.
31. Seven jurisdictions support a role for the PAC to scrutinize the creation and divestiture process.
32. Six jurisdictions consider that the PAC provides the legislature with adequate reports on Crown corporation issues examined.
33. The vast majority of jurisdictions agree that there should be a consistent accountability regime for all corporations (but not necessarily between each corporation type) to report to the legislature.
34. Ten of 13 jurisdictions responded to the survey. The ones that did not respond, do have Crown corporations.
35. There are only a few jurisdictions with mixed and portfolio Crowns and they represent a much less significant presence (in both numbers and expenditures) than departmental and commercial Crowns. None have formal legislative accountability frameworks applicable to them. They are generally not accountable to the legislature but, rather, to a parent corporation. Most of the requirements of other Crowns, including plans and budgets and their reporting, are not required of these corporations nor are there requirements for rigorous audits. The PAC and other legislative committees have virtually no role to play in ensuring any form of accountability to the legislature exists for these corporations. Notwithstanding the general lack of framework or mechanisms to ensure accountability, respondents feel that some form of legislative scrutiny should exist.
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