:
Good morning, everyone. I'd like to welcome everyone here today to this 57th meeting of the Standing Committee on Canadian Heritage.
Pursuant to Standing Order 108(2), we are undertaking a full investigation of the role of a public broadcaster in the 21st century, examining a special report of the Auditor General of Canada presented to the board of directors of the Canadian Broadcasting Corporation on November 30, 2005.
Before we ask Ms. Fraser to start, I would like to bring to the attention of the committee that as the consideration of the main estimates has been referred to the committee of the whole under Standing Order 81(4)(a), we will be removing it from our agenda. Therefore, the minister will not be at our committee May 15. I would just like to let you know that. So the minister will not be here on May 15, because we will be debating it in the House in a committee of the whole. Thank you for that.
I welcome this morning, from the Office of the Auditor General of Canada, Auditor General Ms. Fraser, as well as Mr. Flageole and Ms. Charron. Welcome.
Would you please go forward?
We thank you for this opportunity to discuss the results of our last special examination of the Canadian Broadcasting Corporation, CBC.
The examination was carried out between April 2004 and April 2005, and we presented our report to the board of directors on November 29, 2005. The report was subsequently made public by the corporation on December 7, 2005.
As you mentioned, I am accompanied today by Richard Flageole, Assistant Auditor General, and Julie Charron, principal, who were responsible for this examination.
I would like to begin by explaining that special examinations are a key component of the control and accountability framework for federal crown corporations. Our mandate for such examinations is outlined in legislation and consists of expressing an opinion on whether the corporation has systems and practices in place to provide reasonable assurance that its assets are safeguarded and controlled, that its financial, human, and physical resources are managed economically and efficiently, and that its operations are carried out effectively. A special examination must be conducted at least once every five years, and the results are provided to the board of directors.
[Translation]
Since your committee is currently conducting a full investigation of the role of a public broadcaster in the 21st century, it is important to note that we do not comment on the appropriateness of the CBC's mandate in our examination. In fact, the legislation expressly prohibits us from expressing any opinion on the merits of the mandate given to the CBC by Parliament.
However, we did examine how the CBC measures its performance and reports the results achieved under its current mandate. We found that in order to demonstrate its level of efficiency and the extent to which it is meeting its corporate objectives, the CBC had to develop and implement a corporate-wide performance management framework; provide better costing information for programming and activities; and make improvements in internal and external reporting practices.
Weaknesses in these areas led us to conclude that the systems and practices we examined had a significant deficiency in terms of the CBC's internal and external accountability.
Specifically, we found that although the CBC had developed a certain number of performance indicators that included both quantitative and qualitative indicators to reflect its role as a public broadcaster, these indicators were incomplete. These indicators addressed primarily programming and not the other five strategic areas and priorities identified in the CBC's corporate plan—efficiency, creative human resources, strategic partnerships, collaboration, and strong stakeholders relationships. Moreover, we noted that the development and use of targets to set performance expectations varied among the media lines and other corporate functions; some had clear and measurable targets, while others did not. The lack of such targets makes it difficult to assess how well the corporation is fulfilling its mandate.
[English]
In addition, we noted that senior managers did not have relevant costing information for programming and activities to assess the efficiency of CBC's operations. More specifically, management reports did not break down the costs of activities by major categories, such as staff costs, operating costs, and facilities costs. Having these would allow for comparisons over time as well as with similar activities within the corporation and with those of external organizations. Further, the format and contents of the reports were not consistent within and between media lines and other components. As a result, it is difficult, and in some cases not feasible, to compare performance and costs between networks.
We also found a number of weaknesses in external reporting practices, including a lack of performance measures and targets in the corporate plan, inconsistencies between the performance indicators presented in the annual report and those developed internally, and a lack of alignment between the financial information in the corporate plan and that in the annual report.
Other than annual expenses for media and other corporate functions, the financial information provided in the annual report does not demonstrate the resources targeted and used to achieve the corporation's objectives. In our view, significant improvements in external reporting practices, including reporting to Parliament, are needed to meet public accountability expectations of a corporation with the size and importance of the CBC.
Finally, Mr. Chair, I would like to note that we did note many areas of strength in the corporation's systems and practices, as well as other opportunities for improvement, and these are described in more detail in our report.
[Translation]
Mr. Chair, we discussed all these observations with senior management and the board when we presented our report in 2005. They agreed with our observations and assured us that our recommendations would be acted on. We understand that the CBC has undertaken several initiatives to address our recommendations, but we have not conducted any follow-up work on these initiatives and cannot comment on their effectiveness. The committee may wish to ask the CBC about the actions taken and the progress made in this regard.
Thank you, Mr. Chair. We would be pleased to answer any questions the committee might have.
I would like to thank you for your presentation.
One of the notes that you had really struck me, because we are currently doing a CBC mandate review. We've heard from witnesses over several weeks now that there has been a significant change to CBC over the last decade, primarily in terms of its budget, but also in trying to meet the challenges of audience fragmentation.
You talked about the management reports. What really struck me was that if the targets are not clear and measurable for these categories, how is the CBC to meet these challenges, especially in a particularly challenging time? Could you elaborate on what you found in those categories in terms of clear and measurable targets and on senior management's having some costing information? Could you elaborate on that point?
:
We have not compared it with other public broadcasters per se. We have, though, done quite a bit of work on the governance framework for federal crown corporations and what the appointment process is, and we've made recommendations on that. In 2005 the government issued a new framework for appointments, which would involve, for example, much more of a process by the board in identifying potential candidates for the board. It would also involve them in the selection of the president of the corporation. But at the end of the day, it does remain the prerogative of the government to name the boards of directors and the president, because these are Governor in Council appointees.
But the corporations have done a lot of work. We did our first audit on crown corporation governance in about 2000, and we have noted a significant improvement, in which the crown corporations have developed profiles of the competencies they need for their boards of directors. In the recent 2005-2006 appointments, many of the corporations were using head-hunting firms to bring forward possible candidates, and the boards of directors, I would say, were more involved in that selection process than previously.
I'd just like to make a comment on the president becoming the chair. In the CBC there are two distinct positions—which was also a change that was made. There were certain crown corporations that did have a combined position, and that has been changed, I believe, in just about all; there may be one left. But there was also a recommendation brought forward that those two positions should be kept separate. It's only when the chair has resigned or left that the president becomes the chair, and then it's simply a question of the appointment of a new chair. So it's an interim situation.
Thank you for appearing before us.
I'd like to follow up on what Mr. Angus talked about at the beginning, the issue of governance. In section 38 of your report your statement is, “Overall, we found the core elements of a good governance framework in place”. As Mr. Angus and also Mr. Kotto have stated, the testimony before this committee doesn't necessarily reflect that. Quite a number of the stakeholders have had differing opinions. I'll refer to three of them.
First of all, the Friends of Canadian Broadcasting suggested that “...the CBC board of directors should be chosen at arm's length from patronage, drawn from the best and the brightest Canadians...”.
We had the Communications, Energy and Paperworkers Union stating, “At present, appointments are political and reflect poorly on government and the CBC/Radio-Canada. The current governance system, in fact, ensures failure.”
Then we had Mr. Manera and Mr. Neville, who I'm sure you're familiar with, who stated:
We propose that while the chair, vice-chair and all other directors would be appointed by the Governor-in-Council, such appointments should be subject to parliamentary confirmation.
They go on to say:
Furthermore, we recommend that the board of directors should be responsible for the appointment of the president.
These are different governance structures from what we currently have at the CBC.
You had a general comment on the appointment of the president, but I didn't hear you say whether you prefer the president to be appointed by the board and accountable to the board, as opposed to being appointed by the Governor in Council.
:
I would start by saying, Mr. Chair, that we have to recognize that CBC is a crown corporation. The Government of Canada is the shareholder of this corporation. People can say it's political or it's not, but that is quite the reality of the environment in which it works.
So the government is the shareholder of CBC, and it is usually the shareholder who appoints the directors of any corporation. The important issue we were trying to get at when we were doing our audits on the framework of how these appointments are made is whether they meet the needs of the corporations. Is there good identification of the skills and competencies that are needed around the table to oversee these and to be members of boards of very large, very complex crown corporations?
We do not question in any way the prerogative of Governor in Council to name the board members. I think the best practice in the private sector, certainly, is that the board would name the president. There are a couple of crown corporations--two, I think--in which that is the case, in which it is the board that names the president. That practice might make the president, instead of the minister, more accountable to the board.
But I'm not sure that we've noted that having the Governor in Council name the president has been particularly problematic, as long as there has been a good rigorous process to select the best person for that position.
Welcome. I'm certain that your contribution will be helpful to us.
There's an interesting note having to do with the relationship between related entities within the government--the CRTC, the department, the CBC--in a different way. But it did reveal itself even in the context of the discussions we had earlier about the Canadian Television Fund regarding where responsibilities lie and so on, without casting any blame, I think.
Is it clear? Does section 61 reflect some uncertainty on your part as to how that relationship works, or is it simply that you're recommending they have more interaction with each other?
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Finally, on the question of governance, I heard you say that you wouldn't want many more processes involved in appointments, because very often people are waiting and so on. We've had recommendations from the industry and from third parties that perhaps we should have some kind of vetting system that would allow experts to identify potential board members.
I don't think this is intended to reflect on the quality of the people who have been on the board in the past, but it offers a level of quality control or a certain guarantee that there's an external, broad-based interest of experts who would recommend appointment by directors.
Would you see that as, at least potentially, an improvement--to assure that? I'm not saying that there's not quality there now, but just to make assurances of that. And if that were to happen, would the government not be more willing, perhaps, to let the board pick the president? If you have that guarantee, then I think you're less likely to want to make sure you pick the president to make sure that you have the guarantee there.
:
We did an audit of the governance of crown corporations in 2005. We looked at what were best practices at the time in the private sector as well, and in other governments around the world. The real issue comes back to making sure that you have the competencies and the skills around the table to be able to fulfill the role of board of directors for what are very large, very complex organizations.
The process put in place at the time appeared to us to be--on paper, certainly--a good one. The boards would develop profiles. Those would be submitted. There was also discussion about setting up--I believe it has been established, but it may not be actually be functioning--a commission or an independent group that could receive applications from people, that would use search firms to go out and get people. The boards themselves were using search firms to go out and identify possible candidates, then would recommend a certain number of names, two or three names, to the government. Then the government could pick.
As long as there's rigour and you're really looking for people with the right competencies, that appears to us to be a reasonable process. I think there are other ways of doing it as well, but it's important that the board be involved in the selection. They know what they need around the table.
To have the board involved in the selection of the president is, I think, absolutely essential. We have recommended...and we saw several examples of where the board was very actively involved in the search process. Board members, such as the chair, would participate in the interviews and be a very active part of the selection.
I think that system can work well. I'm not saying that the other system, where the board picks, doesn't work; I guess I would just be a little cautious. We have some examples of where the board is largely made up of people from the private sector who may not be fully cognizant of some of the issues of a public sector corporation. If there isn't that kind of accountability back to a minister or to government, the government has to find another way to make sure that those board members and the president are fully cognizant of the issues in working in a public sector environment. We've seen issues as detailed as perks being given to presidents that were inappropriate in a public sector context but that in a private sector context would be absolutely appropriate.
So there's that kind of difference, and that sensitivity to public sector issues. There has to be a way to bring that to the board. Currently it's really through the minister that this happens.
Good morning and welcome, Ms. Fraser, Mr. Flageole and Ms. Charron.
Ms. Fraser, on page 23 of your report, there is a section entitled, “CBC needs to enhance its strategic planning for horizontal issues”. I found this chapter very interesting, because I think it is the key to proper accountability and transparent management. We do not have much time, but I would like to ask you to clearly explain what strategic planning is and what parts of this planning we, as legislators, should focus on.
I realize the question I am about to ask you is possibly going to be outside your mandate, but I'm asking it anyway, because it is a huge problem—and you've mentioned it in paragraphs 29 and 30, and at the back on page 45. It has to do with the conflict between the CBC's mandate to be a public broadcaster and to have quality Canadian programming, and its need to be competitive and therefore to buy advertising. It is obvious that the CBC has to go out for advertising, since it doesn't have the funds it needs from the public sector or government. So there is a conflict there.
The second part is about its need to keep up and compete in terms of technology, in terms of digital media. It really needs to move forward, if it's going to be truly competitive. To do that, it needs money.
The third part, of course, is how does it get on those platforms and move forward?
So we have the issue of competitiveness and advertising and how the CBC can perform properly in terms of achieving its mandate while trying to do that. It begs the question of, should the CBC be freed of its reliance on an advertising budget? How would that change the structure and the mandate and the reporting of the CBC, its governance, etc.? Would it necessarily do so?
:
That's a very interesting question, which is outside our mandate. We of course do these audits in the context of the mandate that is given to the CBC, and we are expressly precluded from commenting on the mandate.
We do note, though, the challenge for the corporation of reconciling the fact that it is competing with private broadcasters and its public policy role. Some people can view these as being in conflict, and we're stating in here—as we actually say to many crown corporations—that it is very important that they clearly outline how they interpret their public policy role and how they reconcile it with any transactions they do that are more commercial in nature. The CBC is probably one of the most significant crown corporations carrying out more commercial activities, so it is important that they define it. But I would say this really goes back to the mandate given to the CBC. At this point, it is perfectly permissible for them to do these kinds of activities, and I would suspect they view these as important in generating revenue to allow them to face many of the challenges they have.
So, would it change? I don't know. It wouldn't change the governance structure. It would still be like any other crown corporation; you would still have to have people on the board who were familiar with the industry, irrespective of how that happened. It would obviously have a much different mandate and obviously a much different financing arrangement.
:
Thank you very much, Mr. Chairman.
Thank you to our witnesses.
First I have a comment. I appreciate that your mandate in this is quite narrow and that a lot of our questions are outside the mandate of the CBC, so you can really only comment on that. It's too bad, because I'm sure you'd like to tell us a few other things.
I do have one question. Going back to your report, you say the following:
We noted, however, that the development and use of targets to set performance expectations varies among the media lines and other corporate functions; some have clear and measurable targets, while others do not.
You also say that the lack of such targets makes it difficult to assess how well the corporation is fulfilling its mandate.
Could you give us an example of a case where there were clear and measurable targets and a case where there weren't, and how they might improve?
:
We do. In addition to special examinations of crown corporations, of course, we do the financial audit each and every year. There is some discussion with the crown corporation about what they're doing and whether they are meeting the action plan they set out.
In the case of the CBC and others, we also look to what measures they have in place. Have they done an action plan? In this case, they did a very detailed action plan. I think it was some 30 pages or more. We look at the process they have internally to ensure that the action plan is meeting its targets.
CBC has involved their internal audit in tracking this. They also have reports to the audit committee, which also follows that. So that gives us some assurance that the corporation is taking this seriously and is working on it.
When we go back—and a year and a half is still fairly early for some of these recommendations, especially performance measurement and systems—we will look, when we do our financial audit, just to make sure things seem to be progressing as planned. We don't go back in, though, and do a re-audit until we go back for the next special examination.
:
Well, in reading this, “in the interests of the organizations that may be eligible for assistance” covers the entire topic. There is no reason for the words “Quebec and Canada” to be there. Because of the distinction that our friends in the Bloc Québécois make between Canada and.... If I may, for Madam Bourgeois, I believe she will find that the motion in the House that was accepted by the House was to recognize the Québécois as a nation, not Quebec. There is a very important distinction there.
In this instance, because this issue of Québécois, Quebec, Canada, is an issue in Canada, whether we like it or we don't like it, the inclusion of “Quebec and Canada” in this motion doesn't add anything. As a matter of fact, it adds a distraction to the motion. The government couldn't possibly support this as currently written. This is why we're asking for the exclusion of the words “Quebec and Canada”.
(Amendment agreed to)
(Motion as amended agreed to)