GOVERNMENT RESPONSE TO THE SIXTH REPORT ON THE STANDING COMMITTEE ON PUBLIC ACCOUNTS –

“Atlantic Canada Opportunities Agency – Economic Development”

 

 

INTRODUCTION

 

The Standing Committee on Public Accounts tabled its Sixth Report in the House of Commons on December 12, 2002.  The Committee made several comments and eleven recommendations in consideration of the observations on the Atlantic Canada Opportunities Agency (ACOA) raised by the Auditor General in her Report of December 2001.  The Committee’s recommendations dealt primarily with perceived shortcomings in the Agency’s performance measurement and reporting methodologies, its corporate code of ethics to guide decision-making by managers and staff and a training program to accompany the code of ethics.

 

Response to Recommendations of the Standing Committee’s Report

 

Regional economic development has been one of the Government of Canada’s top priorities for many years.  Established in 1987 as a result of this priority, ACOA is a federal government agency whose mission is to work in partnership with Atlantic Canadians to improve the economy of their communities through the successful development of business and job opportunities.  The Agency’s mandate is to increase opportunity for economic development in Atlantic Canada and, more particularly, to enhance the growth of earned incomes and employment opportunities in the region.

 

The Government is pleased to note that the Standing Committee on Public Accounts stated in its Sixth Report that ACOA “has made progress in several areas since last audited by the Auditor General in 1995,” and that “the only significant shortcoming concerning management of commercial projects involved the information reported to Parliament by the Agency on its repayable contributions portfolio.”

 

The Government welcomes the Standing Committee’s recommendations to improve the Agency’s performance measurement and reporting methodologies and corporate ethics and values program.  ACOA has already actioned, or is currently taking action to address, each of the Auditor General’s and Standing Committee’s recommendations, either as a result of the requirement to respond to Treasury Board Secretariat’s management framework (Results for Canadians), its Evaluation and Audit Policies and Modern Comptrollership initiatives, or as part of the Agency’s Modern Business Management Initiative.

 

 

This response addresses the Standing Committee’s eleven recommendations and outlines the Government’s proposed action to deal with them.  For continuity and simplicity purposes, recommendations 1 and 2 relating to performance reporting on the Agency’s commercial projects (i.e. repayable contributions portfolio), as well as the proposed action to address them, have been grouped together.

 

Further, recommendations 3, 4, and 5, relating to the Agency’s non-commercial projects, along with the proposed action to address them have been grouped together, as have recommendations 6, 7, and 8, which relate to defining and reporting outcomes from the delivery of ACOA’s programs to non-commercial clients.  Recommendations 9, 10 and 11 are presented separately along with the Agency’s proposed action to address them.

 

Recommendations 1 and 2

 

That the Atlantic Canada Opportunities Agency establish performance targets for its repayable contributions portfolio that include targets for collections, accounts defaulted, write-offs, and the mix of risk in the balance of the portfolio, and provide those targets in its Report on Plans and Priorities, beginning with the Report for 2004.

 

That the Atlantic Canada Opportunities Agency report performance against the targets set for its repayable contributions portfolio in its annual departmental performance reports, beginning with the Report for the period ending March 31, 2004.

 

Response

 

In 1995, the Agency introduced its Business Development Program (BDP) to directly assist small and medium-sized enterprises wishing to establish themselves, or expand and modernize their operations, along with the requirement that loans be repayable.

 

ACOA’s repayable contribution policy is consistent with the Treasury Board Repayability Policy of 1990 and additional Ministerial restrictions put in place in 1995 and 1996.

 

The Agency enters into each repayable contract with the expectation that it will be repaid in full, and no new financial assistance is approved to existing clients unless they are up-to-date in their reporting and repayment obligations.  However, economic reality and uncertainty always result in a percentage of clients who are unable to fully repay their loans.  In instances such as these, ACOA institutes commercial debt collection practices, which may include involvement of the Recovery Unit at Head Office, to try to recover the remaining portion of funds owed to the Agency.

 

ACOA has collected approximately 80% of its forecasted scheduled repayments on an annual basis for the past two years.  Approximately 15% of those forecasted revenues are rescheduled to future years, and approximately 5% represent defaulted contracts and write-offs.  The collection of repayable contributions under BDP is expected to exceed early estimates by almost 10% and should total approximately $44.8 million in FY 2003-2004.

 

ACOA has also explored the risk mix of its repayable contributions portfolio over the past several years and noted that it has become more risk averse.  A recent evaluation of the Business Development Program will provide a good starting point for discussions on risk mix and establishing performance targets over the coming months.

 

The Agency has calculated that the cumulative rate of defaulted contracts and write-offs since 1995 is 12% ($71.2 million of a total $571.5 million in expenditures to date) and the average annual combined default and write-off rate over the past four years was 4.3% (4.8% in FY 2001-2002).  ACOA anticipates that it will write off approximately $18 million in FY 2003-2004.

 

Concerning the Agency’s risk mix, ACOA’s planned risk mix for FY 2003-2004 is as follows:

 

Risk Rating	Current	Anticipated Mix
Low Low-Medium Medium Medium-High High	14% 29% 35% 16% 6%	10% 25% 35% 25% 5%

 

 

As requested by the Standing Committee in its Sixth Report, the foregoing information has been included in the Agency’s Report on Plans and Priorities for FY 2003-2004.

 

Recommendations 3, 4 and 5

 

That the Atlantic Canada Opportunities Agency develop, in close consultation with the Office of Values and Ethics at Treasury Board Secretariat, a code of ethics to guide the decision-making of its managers and staff and an ethics training program to accompany it.  The code and training program must be completed and implemented no later than June 30, 2003.

 

That the Atlantic Canada Opportunities Agency prominently display its code of ethics in all of its offices where public business is transacted and that it inform all clients and applicants for funding of its ethical standards.

 

That the Atlantic Canada Opportunities Agency develop sanctions to be imposed when its managers and employees are found to be in contravention of its code of ethics or the intent and terms of the programs that it delivers.

 

Response

 

The Agency has a Code of Professionalism approved by the Agency’s Executive Committee.  The Code, which is posted on ACOA’s Web site, covers values such as respect, honesty and integrity.  Following is an excerpt from the “Integrity” portion of the Code:

 

·          Be true to ourselves in endorsing the Agency’s mission

·          Act in such a way as to increase the public’s confidence in the public service

·          Follow departmental and governmental policies

·          Protect public monies and provide value for money

 

Employees have recourse to an ombudsperson if they wish to discuss issues of wrongdoing in the workplace, and all new employees are encouraged to review the Agency’s Code as part of their orientation session.

 

As part of the Agency’s Modern Business Management Initiative, the Code is being carefully reviewed, compared with best practices used across federal departments and agencies, and adjusted as necessary.  A new process will be implemented to regularly remind all employees of the importance of values and ethics in the workplace.

 

The portions of the Agency’s Code relating to honesty and professionalism in transacting business with clients and stakeholders will be displayed in prominent places at Head Office and regional offices, as well as on the Agency’s Web site, and will form part of each client interaction.

 

All Agency employees are subject to Treasury Board standards of discipline, where each incident of alleged misconduct is considered on the basis of individual merit.  Employees found to be in breach of established standards of conduct are subject to disciplinary measures ranging from an oral reprimand to termination of employment.

 

More specific to the issue that gave rise to the three Standing Committee recommendations above – the perception of an overly close ACOA relationship with the Board of Greenwich Developments Inc. – are the Agency’s actions with respect to involvement with private sector boards of directors.  In this area, ACOA officials have consulted with the Department of Justice and issued new guidelines for employee participation on boards.

 

To ensure that Agency employees understand the spirit and intent of the Code, the professional and positive tone set by the President of ACOA at the Standing Committee meeting of April 23, 2002 has been continued.  Furthermore, the Agency’s commitment to transparency in its operations, the enhanced role being played by audit and evaluation under the Government’s new Review Policy and consistent adherence to the terms and conditions approved by the Treasury Board Secretariat for ACOA’s various programs will be key to addressing the three foregoing recommendations.

 

Recommendations 6, 7 and 8

 

That the Atlantic Canada Opportunities Agency submit copies of the evaluations of the Business Development Program and the Community Business Development Corporations to the House of Commons Standing Committee on Public Accounts following their completion.

 

That the Atlantic Canada Opportunities Agency provide details of the actions it intends to take in response to the evaluations of the Business Development Program and the Community Business Development Corporations in its Report on Plans and Priorities for 2004.

 

That the Atlantic Canada Opportunities Agency include a discussion of the outcomes produced as a result of changes it has made to the design and delivery of the Business Development Program and its agreements and relations with Community Business Development Corporations in its performance reports, beginning with the Report for the period ending March 31, 2004.

 

Response

 

The Agency will provide copies of the two evaluations – Business Development Program (BDP) and Community Business Development Corporations (CBDCs) – when completed, to the House of Commons Standing Committee on Public Accounts as requested.  Further, the Standing Committee will be provided with an Agency action plan that addresses the recommendations arising from the two evaluations.

 

The evolution of the Business Development Program, as a result of changes made in response to the evaluation and any other changes to the Program, as well as the Agency’s relationship with the Community Business Development Corporations, will continue to form part of the Agency’s Reports on Plans and Priorities (RPP) and Departmental Performance Reports (DPR).  Targeted results for the BDP and CBDCs will continue to be included in the Agency’s RPPs, and success in meeting those results will be included in subsequent DPRs.

 

 

Recommendation 9

 

That the Atlantic Canada Opportunities Agency develop clear guidance on reporting, accountability, transparency, and protecting the public interest with regard to all of its programs, include these guidelines in its Report on Plans and Priorities for 2004, and begin discussing adherence to this guidance in its performance reports, beginning with its Performance Report for the period ending March 31, 2004.

 

Response

 

The Agency has made reporting, accountability, transparency and protecting the public interest the cornerstones of its results-based management approach to program planning, monitoring, audit and evaluation.  It should be noted that ACOA was awarded the inaugural Canadian Comprehensive Auditing Foundation-Treasury

Board of Canada Award in 2001 for the pursuit of excellence in public performance reporting.  That said, the Agency will continue to strive for excellence in its approach to results-based business reporting.  The Agency’s Review Policy is being updated to reflect changes in Treasury Board guidance.  A specific section on Review Services has been added to the FY 2003-2004 RPP, as well as a table outlining the specifics of the Agency’s FY 2003-2004 Review Plan.

 

Recommendation 10

 

That the Atlantic Canada Opportunities Agency specify the methodology used whenever citing job creation numbers in any of its reports and accountability documents, indicating any drawbacks associated with its use, and include, when appropriate, a caveat that the numbers are estimates only.

 

Response

 

The Agency recognizes the importance of reliable estimates of the economic impact of its programs, and the need to continuously validate current performance measurement methodologies and to identify new measures that would complement existing ones.  The Auditor General has complimented ACOA in the past for work in this complex and difficult field, and the Agency will continue to work to identify new and better methodologies for measuring performance and reporting on results.

 

Every effort is made to specify which methodologies were used in calculating results and/or outcomes in all of the Agency’s reports and documents.  ACOA will continue to ensure that estimates are backed by reference to current research and, where necessary, emphasize these numbers are estimates only.  Due to the complexity of the methodologies used in calculating job creation numbers, comparative wage growth, comparative survival rates, etc., it is impractical to include complete methodologies in each instance.  However, the results cited by the Agency are always supported by empirical evidence (often collected by third parties such as Statistics Canada).  Complete methodologies are available on the ACOA Web site.  The Agency will ensure that links to the full supporting documentation are always evident.

 

Recommendation 11

 

That in addition to any studies already requested, the Atlantic Canada Development Agency [sic] submit upon completion, to the House of Commons Standing Committee on Public Accounts, all evaluations, reports and studies related to issues raised by the Auditor General of Canada in Chapter 6 of her December 2001 Report.

 

Response

 

The Agency will provide all evaluations, reports and studies related to issues raised by the Auditor General in Chapter 6 of her December 2001 Report.  As indicated in the Standing Committee’s Report, ACOA has posted its action plan for addressing the recommendations in the Auditor General’s Report to its Web site.  The Agency also posts summaries of all audit and evaluation reports to this site.