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|Trends in Crown Agency Accountability Arrangements by Ken Stewart|
|Monday, 25 February 2008 20:00|
Ken Stewart is a municipal councilor for the British Columbia community of Maple Ridge, and a former Member of the BC Legislative Assembly. He was first elected to Maple Ridge Council in 1996, and returned to municipal office in 2005 after serving as an MLA from 2001 to 2005. As an MLA, Ken's responsibilities included Chair of the Select Standing Committee on Crown Corporations, which reviewed the performance of many of BC's Crown agencies. He is a member of CCAF's Accountability and Audit Program Advisory Group.
This article is intended solely to encourage discussion of the important issue of Crown agency accountability, and not as a formal report on research findings.
A third of a trillion dollars. That, is the estimate of the value of assets under the stewardship of Canada's federal and provincial Crown agencies.
Given their immense influence on the economic and social well-being of Canadians, Crown agencies deserve the close attention of legislators, academics, the media and the central agencies of government. It is particularly important, I think, that our Crowns have appropriate governance and accountability arrangements in place.
But what, exactly, is appropriate? Governments establish Crown agencies to achieve the benefits that a more autonomous organization can provide. They are faced with the challenge of creating an accountability environment in which opportunities are realized in alignment with government policy, and in which risks are effectively minimized without unduly constraining autonomy.
In 2006, CCAF examined government-wide Crown agency accountability arrangements. The foundation sought out information from central agencies of government and legislative audit offices. It will soon publish a jurisdiction-by-jurisdiction report on government-wide accountability arrangements for Crown agencies.
I have had the opportunity to draw on that information to put together some observations on national trends in Crown agency accountability arrangements in Canada.
Trend 1: Consolidated descriptions of accountability arrangements
Several Canadian jurisdictions now provide a composite picture of the accountability arrangements they have in place for their Crown agencies.
Trend 2: Creating, Reviewing, Transforming or Dissolving Crown Agencies
Relatively few jurisdictions articulate the steps they follow in establishing a Crown agency. British Columbia's Manual provides a fairly detailed outline of the process that government follows in creating a new Crown agency. Ontario's Agency Establishment and Accountability Directive of 2000, promulgated by the Treasury Board/Management Board of Cabinet, clearly outlines the steps to be followed there.
As a government's policy agenda changes, the need for individual Crown agencies may change. Periodically, a government may wish to expand or reduce the mandate of an agency, or review all Crown agencies, or review a particular sector of Crown agencies, such as government enterprises. Two jurisdictions, Ontario and British Columbia, describe this process in some detail.
The Government of Ontario's Directive alludes to the need to periodically review the ongoing requirement for a Crown agency, and provides guidance on the relevant issues.
British Columbia's Manual has a chapter on conducting a mandate review. According to the Manual, there are three purposes for such a review. Are new directions required? Is there a need for re-structuring? Is there still a requirement for independence from government? A responsible minister may initiate a formal mandate review based on 11 potential “triggers”, such as ongoing financial issues, engagement in high-risk activities or friction between an agency and its major shareholders.
British Columbia has extensive experience in this area – in 2002, a newly elected government reviewed the continued relevance of the province's major government enterprises.
Ontario and British Columbia deal with the issue of agency transformation and termination in their Directive and Manual respectively.
Trend 3: Board Accountability Requirements
There is a national trend to supplement the accountability and governance expectations of Boards of Director – usually set out in enabling legislation – with some form of government-wide authority instrument. Such instruments generally set out minimum expectations on the Boards of Directors of all Crown agencies to provide basic accountability reporting documents, such as annual reports, budgets and long-term plans.
Most jurisdictions are using authorities other than Provincial or Financial Administration Acts to set a baseline of minimum expectations for Crown agency Boards of Directors. Five alternative authority instruments have been used across the country. These instruments include:
British Columbia, Alberta, and Newfoundland and Labrador have used GAT legislation to set minimum expectations for accountability reporting. British Columbia also uses Premier-endorsed guidelines and its Manual. Alberta, in addition to GAT legislation, has chosen Cabinet-approved recommendations from a comprehensive governance review of agencies (the Renner Report). Newfoundland and Labrador uses a handbook and central agency directives to define more precisely the expectations on all Boards of Directors of Crown agencies. Ontario's Directive has Cabinet approval.
Trend 4: Appointing a Board of Directors
The selection of members of a Crown agency Board of Directors is a critical governance decision. The personalities, aptitudes, competencies and experiences of the appointees will affect the extent to which there is a workable chain of fiscal and policy accountability.
The prevailing norm is to use enabling legislation rather a government-wide authority to set out the process to be followed for Crown agency appointments. Two exceptions are Ontario and British Columbia.
Ontario has created a Public Appointments Secretariat, and British Columbia a Board Resourcing and Development Office. Both offices are in the Office of the Premier, and appoint most directors of Crown agencies.
In 2005, New Brunswick's Commission on Legislative Democracy recommended that the government of that province:
Trend 5: Providing Policy Direction
In a traditional department or agency, a Cabinet minister is accountable for the governance of her or his department or ministry. In a Crown agency, there are additional actors – the Chair of the Board of Directors, the Board itself, and the CEO. Governments need to govern Crown agencies in a way that both respects autonomy and ensures that agencies are “aligned” with the direction of the government.
Many jurisdictions have clearly articulated and communicated the roles and responsibilities of the key actors, and the nature and limits of delegated authority.
The Letter of Intent, Shareholder's Letter of Expectation and Memorandum of Understanding generally:
In all jurisdictions, the governance of Crown agencies is based on informal meetings, correspondence and telephone calls between responsible ministers and Chairs of Boards of Directors or CEOs. One objective of these communications is to provide policy direction (e.g. financial targets, expected levels of service, anticipated client satisfaction).
Some jurisdictions use a Manual or Handbook to create a shared understanding of the respective roles of the Cabinet, responsible minister, Chair of the Board, and CEO. Others, such as Saskatchewan, have developed unique governance structures that contribute to clarity in the accountability relationships for the major government enterprises in the province.
In British Columbia, Cabinet is the owner, the responsible minister is the owner's designated representative, and a Board of Directors and a CEO of a government enterprise are the stewards acting on behalf of the owner. The Crown Agencies Secretariat acts as the investment analyst. The Chair (government member) and Vice-Chair (opposition member) of the Select Standing Committee on Crown Corporations are representatives of the citizens, holding the government to account for its stewardship.
Saskatchewan's governance model integrates the concepts of delegated governance, a corporate governance model and ministerial responsibility for major government enterprises. The province's Crown Investments Corporation (CIC) is a holding company for (currently) 11 Crown corporations. The Board of Directors of the CIC is a Cabinet Committee that both provides advice to the Cabinet on sectoral matters and is accountable for establishing and maintaining a governance regime for the large, mostly commercial Crown corporations.
The CIC's basic governance model has been in place for over 50 years. The model is interesting because of its longevity, its scale of operation, and the approach taken to balance autonomy, alignment and the demands of public accountability for the stewardship of billions of dollars of public funds.
Trend 6: Planning, Budgeting and Reporting Requirements
Many jurisdictions provide Crown agencies with direction on the content, timing, and process they should follow in preparing, seeking approval for and tabling their planning, budgeting and performance reporting documents. Some jurisdictions provide direction only for major government enterprises; others do so for most or all of their Crown agencies.
Options for providing direction to major government enterprises include the creation of a separate division of the jurisdiction's Treasury or Management Board, a council model (Manitoba), or a holding company model (Saskatchewan). The council model performs a central agency function for subsidiary Crown corporations. The holding company model provides governance and coordination functions.
Where guidance is provided for most or all Crown agencies, approaches include a traditional Treasury or Management Board model; a secretariat model (British Columbia) for most Crown agencies; and reliance on a responsible minister's administrative staff.
Trend 7: Oversight Arrangements
Oversight for Crown agencies is largely based on a legislature's involvement in approving the Estimates of a government. This review of the supply of money is at the heart of responsible government.
A policy standing committee can exercise policy oversight over Crown agencies when it reviews the portfolio of a given minister, including the Crown agencies that report to that minister. Some Public Accounts Committees also review Crown agencies.
Five legislatures in Canada have committees that focus exclusively on Crown agencies.
In some jurisdictions, responsible ministers are encouraged to attend hearings to answer policy questions; in other cases they are discouraged. The agency CEO generally answers most questions from legislators. In some jurisdictions, the staff of individual members do most of the preliminary research and provide committee members with questions; in other jurisdictions a clerk or part-time researcher prepares the questions.
Some committees tend to focus on the major government enterprises in their jurisdiction. Others provide oversight for all the major types of Crown agencies, ranging from regional health authorities to government enterprises.
Ontario's Standing Committee on Government Agencies reviews most intended appointees to agencies, boards and commissions and prospective directors of corporations in which the Crown acts as majority shareholder (excluding reappointments and appointments for a term of one year or less). Candidates may be asked to appear before the committee to discuss their qualifications. The committee reports back to the legislature on whether it concurs with the intended appointments.
Most jurisdictions now require Crown agencies to present their annual report to the responsible minister, who then tables the report with the legislature. The report is forwarded to a select or standing committee for consideration. The most recent annual report of an agency is usually the starting point for questions during an agency appearance before a committee.
The Select Standing Committee on Crown Corporations in British Columbia has a standard list of questions that guides each hearing. This helps witnesses prepare and keeps the committee focused on relevant areas.
One of the benefits of Canada's federal system of government is that individual jurisdictions can experiment with different ways of getting things done, and other jurisdictions can assess those experiments and adapt them for their own purposes.
Governments and legislatures across Canada are currently experimenting – as they have been for years – with arrangements to provide an appropriate level of accountability for Crown agencies. Achieving the “right” balance is a highly complex and difficult task, and what is right for one jurisdiction or agency or time may not be right for another one.
Nevertheless, there is much to be learned from how our governments and legislatures are handling their responsibilities for providing effective accountability arrangements for Crown agencies.
Reporting Principles Used by
In assessing performance reporting data presented in the annual reports and service plans of BC Crown corporations, BC's Select Standing Committee on Crown Corporations considers these 11 key reporting principles: