2005 Annual Report to Parliament - Crown Corporations and Other Corporate Interests of Canada

II. Overview

There are 43 parent Crown corporations and three wholly owned subsidiaries which have been directed to report as parent Crown corporations for the purposes of the Financial Administration Act.^[1]

Every parent Crown corporation is a legally distinct entity wholly owned by the Crown and managed by a board of directors. The enabling legislation for each parent Crown corporation, whether by a special Act of Parliament or by articles of incorporation under the Canada Business Corporations Act, sets out the corporation's mandate, powers and objectives.

The current portfolio is highly diversified, with corporations operating in many sectors of the Canadian economy. The corporations vary in size and in their demands on the government for financial assistance. Each has its unique purpose in public policy.

Exhibit 1 presents the parent Crown corporations grouped according to the portfolio of the minister through whom they are accountable to Parliament. Please note that, for the purpose of this report, the common names of the following Crown corporations are used (legal name is shown in parenthesis): Canadian Museum of Civilization (Canadian Museum of Civilization Corporation); and National Museum of Science and Technology (Canada Science and Technology Museum Corporation).

Exhibit 1: Parent Crown Corporations Grouped by Ministerial Portfolio^a

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Structural Changes During the Year in Review

Legislative Changes Affecting Crown Corporations

This section of the overview highlights certain legislative changes affecting Crown corporations.

On October 30, 2003, An Act to amend the Canadian Environmental Assessment Act, came into force. It requires federal parent Crown corporations^[2], effective June 2006, to comply with certain provisions of the Canadian Environmental Assessment Act.

An Act to amend the Telefilm Canada Act and Another Act came into force on March 23, 2005. As a result, Telefilm Canada now has a mandate to act in audio-visual industries (no longer limited to feature film industry) including film, television and new media as well as to act in the sound recording industry under agreements made with the Department of Canadian Heritage.

An Act to implement certain provisions of the budget tabled in Parliament on February 23, 2005, came into force on June 29, 2005^[3]. This Act amends the Canada Deposit Insurance Corporation Act to increase the deposit insurance coverage limit from $60,000 to $100,000; repeals the authority of the Corporation to make by-laws respecting standards of sound business and financial practices for member institutions; and provides that the deposits of a federal institution shall automatically be insured.

The latter Act also includes amendments to the Financial Administration Act and other statutes in order to implement components of the Review of the Governance Framework for Canada's Crown Corporations, including naming the Auditor General as either joint or sole external auditor for all Crown corporations^[4] except the Bank of Canada.

On July 20, 2005, An Act to authorize the Minister of Finance to make certain payments came into force. This Act provides the necessary legislative authority to the Governor in Council, in respect to the fiscal years 2005-06 and 2006-07, to authorize a Minister to incorporate a Crown corporation, acquire shares in a corporation and acquire membership interest in a non-share capital corporation for:

• the environment, including for public transit and for an energy-efficient retrofit program for low income housing;
• supporting training programs and enhancing access to post-secondary education, to benefit, among others, aboriginal Canadians;
• affordable housing, including housing for aboriginal Canadians; and,
• foreign aid.

Otherwise, the authority must be given by Parliament as stated in the Financial Administration Act.

Bill C-20, An Act to provide for real property taxation powers of first nations, to create a First Nations Tax Commission, First Nations Financial Management Board, First Nations Finance Authority and First Nations Statistical Institute and to make consequential amendments to other Acts received Royal Assent on March 23, 2005. The First Nations Statistical Institute will be a non-agent Crown corporation governed by Part X of the Financial Administration Act (FAA) unless directed otherwise and has a mandate to strengthen the first nations' statistical capacity. The First Nations Statistical Institute will be fully operational by April 2006.

Policy Changes Affecting Crown Corporations

The amended Communications Policy of the Government of Canada, took effect on November 29, 2004, and is to ensure that communications across the Government of Canada are well co-ordinated, effectively managed and responsive to the diverse information needs of the public. In accordance with Schedule III (Parts I and II) of the FAA, Crown corporations are encouraged to apply this policy's principles to their own communications management processes.

2005 Report of The Auditor General of Canada

The 2005 Auditor General's Report included a chapter covering the governance of Crown corporations. The Report made many recommendations such as clarifying the relationship between key players (e.g. Boards and responsible Ministers), ensuring that the government's expectations of the corporation are publicly communicated, and ensuring that mechanisms are in place to deal with complaints and concerns from interested parties.

The government's response to the recommendations noted that many of the issues raised by the Report were being addressed in the context of the Review of the Governance Framework of Canada's Crown Corporations and that the government remained committed to strengthening the governance of Crown corporations.

2005 Crown Corporations Governance Review

Launched in February 2004, the Review of the Governance Framework for Canada's Crown Corporations is one of a series of initiatives to strengthen accountability and transparency across the federal public sector.

The Review studied both private and public sector trends, and identified 31 measures to be implemented. These measures are aimed at:

• Clarifying the relationship between Ministers and Crown corporations;
• Clarifying the accountability regimes of Crown corporations;
• Making the appointment process more transparent;
• Bringing the governance of Crown corporations in line with reforms in the private sector;
• Strengthening the audit regimes in Crown corporations; and
• Making the activities and operations of Crown corporations more transparent.

Since the tabling of the Review in February 2005, action was taken to implement the measures outlined, through a combination of legislative changes, regulations, policies, guidelines and discussions. Seven of the 31 measures are now completely implemented and the rest are well advanced.

For example, on August 31, 2005, by Order in Council, the following ten Crown corporations (previously falling outside the provisions of the Access to Information Act) were brought under the Act:

• Canada Development Investment Corporation;
• Canadian Race Relations Foundation;
• Cape Breton Development Corporation;
• Cape Breton Growth Fund Corporation;
• Enterprise Cape Breton Corporation;
• Marine Atlantic Inc.;
• Old Port of Montreal Corporation Inc.;
• Parc Downsview Park Inc.;
• Queens Quay West Land Corporation; and
• Ridley Terminals Inc.

The only Crown corporations currently not falling under the Access to Information Act are those whose operations are deemed to be commercially competitive and would be unduly disadvantaged by having to disclose certain information. Nevertheless, discussions are underway to bring these remaining Crown corporations^[5] under the Act.

In addition, Crown corporations are, wherever possible, already voluntarily implementing the Governance Review measures, without waiting for legislation that will force them to comply. Nonetheless, additional legislative action will be required to fully implement the Review.

Special Examinations

Presently, pursuant to section 138 of the Financial Administration Act (FAA), every five years each Crown corporation that falls under the provisions of the FAA is required to be the subject of a special examination.^[6] The objective of this exam, usually conducted by the external auditor of the corporation (typically the Auditor General of Canada), is to determine if, in the period under examination, the financial control and information systems were maintained, and management practices were conducted in a manner that provided reasonable assurance that the assets of the corporation and each subsidiary were safeguarded, controlled, managed economically and efficiently, and that the operations of the subsidiary were carried out effectively.

During the fiscal year 2003–04, the Auditor General (unless indicated otherwise) carried out the following special examinations of Crown corporations:

• Canada Development Investment Corporation (joint auditor);
• Canada Mortgage and Housing Corporation (joint auditor);
• Canada Pension Plan Investment Board (Deloitte & Touche LLP);
• Canada Post Corporation (Deloitte & Touche LLP);
• Cape Breton Development Corporation;
• Defence Construction (1951) Limited;
• Federal Bridges Corporation Limited;
• Pacific Pilotage Authority; and
• VIA Rail Canada Inc.

Through the fiscal year 2004–05 nine special examination of Crown corporations were carried out by the Auditor General:

• Business Development Bank of Canada (joint auditor);
• Canada Commercial Corporation;
• Canada Deposit Insurance Corporation;
• Enterprise Cape Breton Corporation;
• Export Development Canada;
• Freshwater Fish Marketing Corporation;
• Marine Atlantic Inc.;
• National Museum of Science and Technology; and
• Standards Council of Canada.

Overall Crown Corporation Performance

The Financial Administration Act requires that employment and financial data, including aggregate borrowings of parent Crown corporations, be included in this report.

Accordingly, this section of the Overview provides a summary of overall performance by Crown corporations, including the following data:

• employment;
• assets;
• budgetary appropriations; and
• debt obligations.

At the end of this section, two exhibits provide a summary view of all Crown corporations:

• Exhibit 8 shows each corporation's employment and financial position; and
• Exhibit 9 provides information about each corporation's operating results and financing.

Specific information about individual Crown corporations may be found in the Corporate Profiles chapter of this report, as well as in the respective annual reports and corporate plan summaries of the Crown corporations.

A glossary of the financial and employment terms used in this report is provided at the end of this section.

The exhibits presented in this report, as well as all calculations, are based on actual figures. Results of the calculations are rounded for ease of presentation.

Where Crown corporations have re-stated financial data for previous years, readers should be aware that the data in this report reflect only those changes that correct errors from previous years. Amendments may have been made by some corporations in their own documents as a result of changes in their accounting policies that have been applied retroactively to financial statements from previous years. This report and the database of financial information on which it is based do not reflect these amendments.

For Crown corporations with fiscal years ending on or after July 31, 2005, this report shows their financial data for the fiscal year ending in 2004. Accordingly, for the Canadian Dairy Commission and the National Arts Centre Corporation, this report covers the period ending July 31, 2004, and August 31, 2004, respectively. All of the other corporations' data are for their respective 2004 or 2004–05 fiscal years.

Employment

Employment by Crown corporations has been increasing over the last five-year period.

Notably, the annual reports of five Crown corporations, the Canadian Broadcasting Corporation, the Canadian Race Relations Foundation, the Freshwater Fish Marketing Corporation, Ridley Terminals Inc., and Telefilm Canada, were not tabled in Parliament in sufficient time to allow their inclusion in this report. Last year, these Crown corporations accounted for 11.0 per cent of total employment with 7,892 employees.

Of the 41 Crown corporations whose employment information is included in this year's report, a significant increase of 9.2 per cent over last year's employment figures for the same corporations was noted. The largest fluctuations occurred for:

• Canada Post Corporation—increase of 5,601 employees (12 per cent);
• Royal Canadian Mint—increase of 201 employees (43 per cent);
• Bank of Canada—increase of 69 employees (7 per cent); and
• Canadian Tourism Commission—decrease of 25 employees (15 per cent).

Exhibit 2 shows the changing trend over the last five years. Note that the decrease in employment in 2004–05 is artificial, as the figure reported does not include employment for five Crown corporations whose data could not be included.

Exhibit 2: Employment in Crown Corporations, 2000–01 to 2004–05

Note: Data for 2004–05 exclude the Canadian Broadcasting Corporation, the Canadian Race Relations Foundation, the Freshwater Fish Marketing Corporation, Ridley Terminals Inc., and Telefilm Canada.

Assets

Again, since the annual reports of five Crown corporations were not tabled in Parliament in sufficient time to allow their inclusion in this report, the data are incomplete. Last year, the assets of these five Crown corporations totalled $1,784 million and accounted for 2 per cent of total assets.

Despite the omission of these five Crown corporations from this report, total assets increased by $1,932 million or 2.5 per cent. The total assets of the 41 Crown corporations included in this year's report increased by $3,716 million or 4.9 per cent when compared with the same 41 corporations last year. The largest fluctuations in assets were noted for:

• Canada Mortgage and Housing Corporation—$1,704 million increase (7 per cent);
• Farm Credit Canada—$1,190 million increase (12 per cent);
• Business Development Bank of Canada—$635 million increase (7 per cent); and
• Export Development Canada—$365 million decrease (2 per cent).

Five Crown corporations accounted for 91 per cent of the total assets reported in 2004–05: Canada Mortgage and Housing Corporation, Export Development Canada, Farm Credit Canada, Business Development Bank of Canada, and Canada Post Corporation. The same five corporations accounted for 89 per cent of the total assets in the previous year.

Exhibit 3 demonstrates the fluctuations in the value of Crown corporations' assets over the last five years.

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Exhibit 3: Total Assets of Crown Corporations, 2000–01 to 2004–05

Note: Data for 2004–05 exclude the Canadian Broadcasting Corporation, the Canadian Race Relations Foundation, the Freshwater Fish Marketing Corporation, Ridley Terminals Inc., and Telefilm Canada.

Budgetary Appropriations

An increase in parliamentary funding for capital and operating purposes brought total budgetary appropriations to $5,275 million in 2004–05. The additional $34 million represents a 0.6 per cent increase from the previous year.

The largest fluctuations were noted for the budgetary appropriations for:

• Canadian Air Transport Security Authority—$152 million increase (43 per cent); and
• VIA Rail Canada Inc.—$66 million decrease (25 per cent).

Total budgetary appropriations for the five-year period from 2000–01 to 2004–05 are shown in Exhibit 4. Unlike other exhibits in this section, the reported figures include all Crown corporations, as budgetary appropriations are disclosed in the Main and Supplementary Estimates of the Government of Canada.

Exhibit 4: Total Budgetary Appropriations, 2000–01 to 2004–05

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Six Crown corporations accounted for 80 per cent of the total funding received by Crown corporations from appropriations. These were the Canada Mortgage and Housing Corporation (CMHC), the Canadian Broadcasting Corporation, the Canadian Air Transport Security Authority, Canada Post Corporation, VIA Rail Canada Inc., and Atomic Energy of Canada Limited. For CMHC, which was the largest recipient, 95 per cent of the appropriations flow to assist Canadians with their housing needs.

Exhibit 5 provides a summary view of the 2004–05 recipients of budgetary appropriations.

Exhibit 5: Recipients of 2004–05 Budgetary Appropriations

Debt Obligations

Total debt obligations, consisting of debts payable to Canada and to the private sector, for the 41 Crown corporations whose information is included in this report, decreased by 3.7 per cent, to $47.75 billion in 2004–05 from $49.58 billion in the previous year. Both borrowings from Canada and borrowings from private lenders decreased by 3.9 per cent and 2.3 per cent respectively.

• Export Development Canada—$1.78 billion decrease (10 per cent)
• Canada Mortgage and Housing Corporation—$1.17 billion increase (8 per cent)
• Farm Credit Canada—$0.972 billion increase (11 per cent)

Exhibit 6 shows the debt payable to Canada, the debt incurred in private markets, as well as the total debt obligations over the last five years. Readers should again note that 2004–05 does not include the appropriations of the five Crown corporations whose annual reports were not tabled in Parliament in sufficient time to allow their inclusion in this year's report.

Exhibit 6: Total Debt Obligations of Crown Corporations, 2000–01 to 2004–05

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Note: Data for 2004–05 exclude the Canadian Broadcasting Corporation, the Canadian Race Relations Foundation, the Freshwater Fish Marketing Corporation, Ridley Terminals Inc., and Telefilm Canada.

The four largest debtors in 2004–05 were Export Development Canada, the Canada Mortgage and Housing Corporation, Farm Credit Canada, and the Business Development Bank of Canada. Their debt obligations represent 32.6, 29.8, 21.3, and 15.3 per cent respectively of the total debt obligations of the 41 Crown corporations included in this year's report. The same Crown corporations were also the four largest debtors in 2003–04.

Exhibit 7 presents the respective debt loads of the four largest debtors in 2004–05 compared to 2000–01.

Exhibit 7: Comparison of Largest Debtors in 2004–05 with 2000–01

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Glossary of Financial and Employment Terms Used in This Report

All financial data are extracted from the Crown corporations' audited financial statements for the recent fiscal year. Certain values are adjusted to apply consistently the definitions that follow. Items are listed in the order in which they appear in the summary exhibits.

Total assets represents all assets reported by the corporation in its audited financial statements.

Long-term liabilities represents all long-term liabilities reported by the corporation in its audited financial statements, including deferred capital funding.

Equity represents the equity of Canada. For some corporations, the excess of assets over liabilities is not deemed to be equity of Canada because of the nature of their operations (e.g. marketing boards).

Employment represents the number of full-time employees obtained from sources such as an annual report, financial statements, or a corporate plan and is as at the fiscal year-end of the Crown corporation. The figure includes the full-time staff and others employed outside of Canada by the parent corporation and its wholly owned subsidiaries. The exceptions are data for the Canada Development Investment Corporation, which relate to the parent corporation only, and data for the four pilotage authorities, which include contract pilots.

Net income represents after-tax income, where applicable, and any extraordinary items. It includes parliamentary appropriations where the corporation has included these in the computation of net income. In some cases, net income is the "excess of parliamentary appropriations over cost of operations" or "excess of proceeds over expenditures." A negative net income (i.e. a net loss) is shown in parentheses.

Borrowings from the private sector include short- and long-term borrowings, capital leases, and any other debt-like instruments. For the marketing corporations (the Canadian Dairy Commission and the Freshwater Fish Marketing Corporation), loans may include payments accruing to dairy producers and fishers.

Borrowings from Canada include short- and long-term borrowings, advances from the Government of Canada for working capital or other purposes, and other debt-like instruments.

Budgetary appropriations refers to parliamentary funding for capital and operating purposes. The amounts exclude grants and contributions paid to Crown corporations where they qualify as members of a general class of recipients. Budgetary appropriations increase the expenditures of Canada and thus have a direct impact on the amount of the government's surplus or deficit.

Dividends represents those declared by the corporation during its fiscal year. This figure includes cash recoveries by Canada (where applicable) and other types of payments or contributions made to Canada (excluding repayments of debt-like instruments). Dividends may be paid by the corporation to the Government of Canada before or after the corporation's year-end.

Exhibit 8: Employment and Financial Position Grouped by Ministerial Portfolio
(as of year-ends before July 31, 2005; $ million) *

* Notes are at the end of Exhibit 9

Exhibit 9: Operating Results and Financing Grouped by Ministerial Portfolio
(as of year-ends before July 31, 2005; $ million) *

Notes for Exhibits 8 and 9

a. This column is not totalled because the information is not reported in a consistent manner.

b. The Cape Breton Growth Fund Corporation, a wholly owned subsidiary of the Enterprise Cape Breton Corporation, has been directed to report as a parent Crown corporation.

c. Financial data for the Bank of Canada, the Canada Pension Plan Investment Board, and the Public Sector Pension Investment Board are provided for information, but are not included in the totals due to the unique nature of their operations.

d. The Old Port of Montreal Corporation Inc., a wholly owned subsidiary of the Canada Lands Company Limited, has been directed to report as a parent Crown corporation.

e. Parc Downsview Park Inc., a wholly owned subsidiary of the Canada Lands Company Limited, has been directed to report as a parent Crown corporations.

^[1] The wholly owned subsidiaries, Old Port of Montreal Corporation Inc., the Cape Breton Growth Fund Corporation and Parc Downsview Park Inc., were directed to report as parent Crown corporations for the purposes of the Financial Administration Act.

^[2] Export Development Canada (EDC) has been exempted form the Act because a separate environmental review framework for projects funded by EDC has been established under the Export Development Act. The Canada Pension Plan Investment Board is also exempted given its unique federal-provincial nature.

^[3] Certain sections will come into force on a day to be fixed by order of the Governor in Council.

^[4] Canada Pension Plan Investment Board, Public Sector Pension Investment Board, Canadian Race Relations Foundation, and Canada Post Corporation were audited by private sector firms. Canada Development Investment Corporation, Canada Mortgage and Housing Corporation, Business Development Bank of Canada, Canada Lands Company Limited, Atomic Energy of Canada Limited and VIA Rail Canada Inc. were previously jointly audited by the Office of the Auditor General and private sector firms.

^[5] These are: VIA Rail Canada Inc., National Arts Centre Corporation, Canada Broadcasting Corporation, Export Development Canada, Canada Post Corporation, Atomic Energy of Canada Limited and the Public Sector Pension Investment Board. The Canada Pension Plan Investment Board is also subject of federal-provincial consultations.

^[6] For some Crown corporations such as the Canada Pension Plan Investment Boardand the Public Sector Investment Board, which are exempt from Part X of the Financial Administration Act, their constituent acts require special examinations only once every six years.