Crown Agency Accountability: A Key Issue

February 26, 2008

CROWN AGENCY ACCOUNTABILITY: A KEY ISSUE

Michael J. McLaughlin

Michael McLaughlin is Chair of the Board of Governors of CCAF. From 1979 to 2002, he worked in the Office of the Auditor General of Canada, serving as Deputy Auditor General of Canada from 1997 to 2002. His responsibilities included audits of VIA Rail and the Business Development Bank of Canada. Mr. McLaughlin served as Vice-President and Chief Financial Officer of the Canadian Air Transport Security Authority (CATSA) from 2003 to 2006. He is now an independent consultant.

CCAF Chair Outlines Research Results for IPAC

Canadians have a right to know whether we have appropriate governance and accountability arrangements in place for Crown agencies, CCAF Chair Michael McLaughlin told attendees at the National Conference of the Institute of Public Administration of Canada (IPAC).

The trick, he said, is in knowing what's appropriate.

Speaking in Winnipeg on August 28, 2007, McLaughlin outlined the results of recent CCAF research into government-wide accountability arrangements for Crown agencies in Canada. In 2006-2007, CCAF examined government-wide accountability arrangements in federal and provincial jurisdictions for Crown agencies other than school boards, universities, colleges and hospitals.

The Role of Crown Agencies in Canada

McLaughlin began by describing the impact of Crown agencies on the economic, cultural and social lives of Canadians. He noted that Crown agencies “provide transportation, operate museums, insure everything from automobiles to crops to bank deposits to export deals, support research and development, produce cultural products, ensure airport security, sell alcoholic beverages, deliver the mail, market commodities, regulate the sale of securities and telecommunications and gaming, produce electricity, provide social housing, and invest pension funds.”

Government enterprises alone manage assets totalling more than a third of a trillion dollars, he said. In 2005 they had revenues of $88 billion, and expenditures of $72 billion.

The traditional organizational model for governments to deliver programs and services is a government department or ministry under the direction of a responsible Minister, McLaughlin said. However, this model is not appropriate for all activities carried out by the public sector.

For example, public sector organizations operating in a commercial environment may need to make buy or sell decisions far more quickly than would be possible in a traditional department. Agencies making adjudicative or regulatory decisions must be perceived as beyond the realm of political intervention.

Governments have therefore set up Crown agencies to be more autonomous than line departments. There are likely about 1,500 to 2,000 Crown agencies in Canada, including school boards, universities, colleges and hospitals. Of this total, approximately 600 are government enterprises, agencies, boards or commissions – that is, something other than school boards, universities, colleges or hospitals. Of these 600 entities, approximately 150 are government enterprises.

CCAF Research Findings*

Drawing on the results of CCAF's research, McLaughlin spoke about six areas where a government may choose to set out government-wide accountability arrangements for some or all of its Crown agencies:

Creating, Reviewing, Transforming or Dissolving Crown Agencies
Setting Board Accountability Requirements
Appointing a Board of Directors
Providing Policy Direction
Setting Planning, Budgeting and Reporting Requirements
Establishing Oversight Arrangements.

Through its research, McLaughlin said, CCAF learned that:

Relatively few jurisdictions spell out the steps they follow in creating a Crown agency.
Governments usually set out their accountability and governance expectations for a Board of Directors in an agency's enabling legislation; however, there is a national trend to supplement such enabling legislation with some form of government-wide authority instrument.
The prevailing norm is to use enabling legislation, rather than a government-wide authority, to set out the process for Crown agency appointments. Ontario and British Columbia are exceptions to this norm. Ontario has created a Public Appointments Secretariat, and British Columbia has established a Board Resourcing and Development Office.
In some instances, the Chief Executive Officer is appointed through the Governor-In-Council process. In others, the Board appoints the CEO. Most jurisdictions have a procedure to approve CEO compensation that extends beyond the Board.
Many jurisdictions have clearly articulated and communicated the roles and responsibilities of key actors (such as the Chair of the Board of Directors, the Board itself, and the CEO), and the nature and limits of delegated authority. All jurisdictions require responsible Ministers to review and approve the key planning, budgeting and accountability reporting documents of most Crown agencies.
Many jurisdictions provide their Crown agencies with direction on the content, timing, and process they should follow for their planning, budgeting and performance reporting documents. This direction can address the preparation of these documents, the approval process for them, and the arrangements for tabling them.
Five legislatures in Canada have committees that focus exclusively on Crown agencies: British Columbia, Saskatchewan, Manitoba and New Brunswick have Crown corporations committees, and Ontario has a Standing Committee on Government Agencies, whose mandate is to review most appointments to the Boards of Crown agencies.

Manitoba's Arrangements

McLaughlin took a few moments to describe accountability arrangements for Crown agencies in Manitoba, the site of the IPAC conference.

The emphasis in Manitoba is on the role of the responsible Minister to hold Crown agencies to account. Independence and autonomy for Crown agencies are key principles. There is no omnibus legislation or government-wide directive addressing governance that applies to all Crown entities in the province.

The Crown Corporations Council plays a special role with regard to seven key Crown corporations. It works with them to develop clear mandates, statements of purpose, and criteria for performance measurement. It reviews long term corporate plans and capital expenditure proposals. And where appropriate, it ensures consistent practices among corporations.

* CCAF's research report Crown Agency Accountability Relationships: Highlights from Canada's Federal and Provincial Jurisdictions, will be available soon at CCAF.

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