PACP Committee Report
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Chair Dear Committee Chair: Pursuant to Standing Order 109 of the House of Commons, I am pleased to respond, on behalf of the Government of Canada, to the recommendations made in the Report of the Standing Committee on Public Accounts entitled “Chapter 6—Special Examinations of Crown Corporations—2011,” of the 2012 Spring Report of the Auditor General of Canada, tabled in the House of Commons on June 10, 2013. The Government of Canada shares the Standing Committee on Public Accounts’ (the Committee) commitment to ensure sound board governance and accountability within all of government, including Crown corporations. In the Auditor General’s 2012 Spring Report, the results of the Canadian Dairy Commission’s (CDC) 2011 special examination are highlighted. I am pleased with the findings of the Auditor General and satisfied with the actions taken by the CDC in response to the Auditor General’s recommendations. I fully support the CDC’s continued efforts in maintaining excellence in corporate governance as a Crown corporation under my portfolio. I would like to thank the Committee for its work in reviewing Chapter 6 of the 2012 Spring Report of the Auditor General of Canada entitled “Special Examinations of Crown Corporations—2011.” I have carefully reviewed the recommendations in the Committee’s Report and I welcome the opportunity to respond to each of the Committee’s recommendations in full. RECOMMENDATION 1 That, by 30 September 2013, the Canadian Dairy Commission’s board of directors develop an inventory of the skills required of board members for effective governance. The Government supports the Committee’s recommendation to develop an inventory of the skills required of board members for effective governance. In fact, the CDC has already developed selection criteria and accountability profiles for each board position. This was done in 2007 in an effort to enhance governance and transparency within the CDC’s corporate structure. These documents were developed based on the guidance document on building an effective board that was developed by the Treasury Board Secretariat. The accountability profiles describe the position, the nature and scope of the work to be performed, the conditions under which the work is carried out, and the core competencies and skills required to achieve the results expected of the incumbent of the position. These documents are updated as required and referred to as needed. Additionally, the CDC has already implemented a measure to ensure a full range of skills is available at both the board and the Audit Committee. Following the Auditor General’s 2011 review, which pointed to the difficulties in a three-member board having the full range of functional skills necessary for effective governance, specifically financial expertise, the CDC revised its board charter to require that the Audit Committee regularly assess its collective skills and seek outside expertise when deemed necessary for specific projects. The Auditor General specifically recommended that the CDC board of directors should periodically assess its collective skills and, if the board identifies a gap in its skills, it should seek outside expertise to complement the skills of its members. The CDC agreed with this recommendation and immediately adopted this practice. For example, the CDC hired a third-party consultant specializing in accounting standards to assist the Crown corporation in its transition from Canadian Generally Accepted Accounting Principles to International Financial Reporting Standards. RECOMMENDATION 2 That, by 30 September 2013, the Canadian Dairy Commission provide the Public Accounts Committee with the policies and practices it has put in place to respond to the Office of the Auditor General’s recommendation on managing conflicts of interest. The Government supports the Committee’s recommendation to put in place policies and practices to manage conflicts of interest on the board of directors. In its 2011 Special Examination Report, the Auditor General recommended that the CDC board of directors develop procedures for members to declare and manage conflicts of interest. As a result, the CDC has already put in place practical measures to mitigate the risk of conflicts of interest. Specifically, in the fall of 2011, the CDC implemented the practice of declaring any real or perceived conflicts of interest at the beginning of all board of directors and Audit Committee meetings. Now, following the review and approval of the meeting agenda, the Chairperson routinely asks committee members to declare any conflicts of interest, as defined in the Conflict of Interest Act and the CDC’s Conflict of Interest Policy, with the topics to be discussed. If a member identifies a conflict of interest, it is noted in the minutes and the committee decides unanimously whether or not the member needs to withdraw from the discussions of the topic in question. The Secretary ensures that “Declaration of Conflict of Interest” appears on the meeting agendas of the board of directors and its subcommittees, including the Audit Committee. The above-noted practice was implemented based on advice from the Conflict of Interest and Ethics Commissioner (the Commissioner). In addition, the CDC specifically asked whether or not there is an inherent conflict of interest in having someone with a background in dairy production, such as a milk producer, as a member of the CDC board of directors, particularly as it pertains to the Conflict of Interest Act. The Commissioner concluded that there was no inherent conflict of interest, quoting section 4 of the Conflict of Interest Act. She did, however, caution the CDC board of directors to nevertheless be careful to avoid conflict-of-interest situations. The CDC therefore made changes to its board’s charter, making it mandatory for the members of the board and its subcommittees to declare conflict of interest with any of the topics to be addressed at their respective meetings. The CDC’s Governance Rules are available on the CDC website at www.cdc-ccl.gc.ca/CDC/userfiles/file/Governance_2011.pdf. RECOMMENDATION 3 That the Department of Agriculture and Agri-Food review the Canadian Dairy Commission Act with regards to the size of the Commission’s board of directors, and report to the Public Accounts Committee by 30 September 2013 on the results of its examination. The Government acknowledges the Committee’s recommendation to review the Canadian Dairy Commission Act with regard to the size of the CDC’s board of directors. Agriculture and Agri-Food Canada (AAFC) reviewed the Canadian Dairy Commission Act with regard to the size of the CDC’s board of directors. Overall, the Department found that the size of the board is appropriate, and it is satisfied with the measures that the CDC has put in place to address previous recommendations of the Auditor General. As part of this review, AAFC compared the CDC’s structure of governance with other federal organizations and concluded that despite having a small board of directors, the CDC manages key operational functions comparatively well. Furthermore, increasing the size of the CDC’s board of directors would be inconsistent with the commitment the Government made in 2010 as part of the Economic Action Plan to reduce the number of Governor in Council appointments to improve efficiency and governance across federal departments and agencies, including Crown corporations. AAFC is of the view that the challenges associated with a board of directors limited to three members can be addressed through good governance practices and continued collaboration with dairy industry partners. AAFC therefore encourages the CDC to continue to seek additional external expertise and factor those views in its decision-making process in an open and transparent manner. The Government of Canada would like to thank the members of the Standing Committee and the witnesses who appeared before it for their insight and commitment to understanding and strengthening sound corporate governance in federal Crown corporations and for their work in preparing this report. Sincerely, Gerry Ritz, PC, MP GOVERNMENT RESPONSE TO RECOMMENDATIONS
REGARDING THE INTRODUCTION The Government of Canada is pleased to respond to the Fifteenth Report of the Standing Committee on Public Accounts (the Committee), entitled: “Chapter 6, Special Examinations of Crown Corporations – 2011,” of the Spring 2012 Report of the Auditor General of Canada, tabled in the House of Commons on June 10, 2013. The Government would like to thank the members of the Committee for their report and recommendations. The Government supports the overall intent of the report and welcomes the Committee’s analysis, views, conclusions and recommendations resulting from its examination of the management of the Canadian Race Relations Foundation (CRRF). The Government Response addresses the important issues raised in the Report, and responds to the two recommendations that directly pertain to the CRRF. GOVERNMENT OF CANADA RESPONSE TO THE COMMITTEE RECOMMENDATIONS The Government has reviewed the recommendations in the report and welcomes the opportunity to respond to the recommendations pertaining specifically to the CRRF. Recommendations one through three will be addressed by the Canadian Dairy Commission. Recommendation 4: That the Canadian Race Relations Foundation inform the Public Accounts Committee when an individual with appropriate investment expertise has been appointed to its board of directors. The Government recognizes the importance of having an individual with appropriate investment expertise appointed to its Board of Directors, given that the CRRF’s operating budget comes from the income earned from a one-time $24 million investment endowment fund. The Government continues to search for qualified individuals to help evaluate investment strategies and the progress of the invested fund. Such individuals would have the requisite background and knowledge, be free of any conflicts of interest, and be willing to serve for a small per diem to advise the Board of Directors on investment issues. The Government is currently considering possible candidates. The CRRF will be pleased to advise PACP once such an individual has either been appointed by the Governor-in-Council to the Board of Directors, or appointed by the Board as an external member of the CRRF’s Investment Committee. Recommendation 5: That the Canadian Race Relations Foundation report by 31 March 2014 to the Public Accounts Committee on the extent to which the Foundation is meeting its investment objectives. The CRRF maintains a Finance and Audit Committee and an Investment Committee that keep the Board informed of investment performance. The CRRF Act requires that the CRRF submit an annual report of activities (April 1 to March 31) to the Minister of Citizenship and Immigration for tabling in the House of Commons within the first fifteen days on which the House is sitting after the report has been completed. The report, which is provided to the Minister by July 31 each year and tabled in the fall, includes details regarding the CRRF’s assets and investment performance. The 2012/2013 annual report confirms that as of 31 March 2013, total assets were $25,249,963, or 2.2 percent above the previous year and approximately $4 million above the 2009 low of $21.3 million. This low occurred due to investment losses driven by the global economic downturn and resulted in a significant financial challenge for the CRRF. By reducing its expenditures by 40 percent, and with guidance from new financial advisors, the CRRF was able to recuperate its losses. Copies of the CRRF’s 2012/2013 annual report will be provided to the Committee after the Minister tables the report in the House, expected in early fall 2013. As per the CRRF’s annual reporting schedule, the 2013/2014 annual report will be provided to the Minister by 31 July 2014, and tabled in the House of Commons in early Fall 2014. |