6.1.1 CATSA’s Board of Directors
6.1.2 Remuneration for members of the Board
6.1.3 The Chief Executive Officer
6.1.4 Relations with the Minister and accountability
6.1.5 Corporate planning
6.1.6 Relationships
6.1.7 Consultation
6.1.8 Financial and administrative arrangements

6.3.1 Operational authority and accountability: Who should do what?
6.3.2 Financial authority and accountability
6.3.3 Administrative authority and accountability

CATSA’s Board of Directors is composed of 11 members, including the Chairperson, who are appointed by the Governor in Council (CATSA Act, s. 10 (1)). The Board includes nominees from the air carriers and the airport authorities (s. 10(2)). This is an important feature and it has “had an excellent effect on relations with these two communities.” ^{[ 3 ]} Airports and air carriers submit names to fill two Board positions each. These submissions come from the two principal industry associations: the Canadian Airports Council (CAC) and the Air Transport Association of Canada (ATAC). ^{[ 4 ]} When satisfied with the names submitted, the Minister recommends appointments to the Governor in Council. Although these stakeholder groups participate in the appointment process, Board members nevertheless must serve the Board as the government’s fiduciaries and bear responsibility for decisions taken. Although the Governor in Council may appoint a trade union representative as a Board member in one of the remaining positions, the Panel thinks that trade unions should have a designated member on the Board.

Directors hold office during pleasure ^{[ 5 ]} for a term of not more than five years and their mandate is renewable only once for five years (s. 13). Only permanent residents or Canadian citizens are eligible to serve on the Board. No full-time public servants, members of the federal or provincial parliaments, or mayors or municipal councillors, may serve on the Board (s. 12). The CATSA Board has a Corporate Governance and Nominations Committee that conducted a recruitment process for the new Chair and recent vacancies, and worked with an executive search firm to attract, interview and select appropriate candidates to recommend to the Board and subsequently to the Minister of Transport. ^{[ 6 ]}

The Board is responsible for the management of the activities and affairs of the Authority (s. 23). It may make by-laws respecting the management and conduct of the activities and affairs of the Authority and the carrying out of the duties and functions of the Board, including its code of ethics, committees and contracting policies (s. 24).

CATSA’s Board has created several committees, including an Audit Committee, a Human Resources Committee, a Corporate Governance and Nomination Committee and a Strategy Committee. The Audit Committee ensures that appropriate ethical practices and financial controls are in place. This includes oversight of corporate records, systems, and management practices. The Human Resources Committee reviews CATSA’s human resources policies, including its compensation and benefits plans, and performance and evaluation programs. The Corporate Governance and Nomination Committee was created in April 2004 to implement systems ensuring good Board performance, such as: establishing, maintaining and evaluating the processes and practices for performance management of the President and CEO; ensuring proper administration and compliance of the Code of Conduct for Board members; making recommendations to the Board on roles of the Board and management, reviewing policies and procedures of the Authority with respect to ethics and values; and ensuring compliance with government policy on Board nominations and appointments. The Strategy Committee was established in December 2005 to oversee CATSA’s participation in the five-year review, to provide advice to the Board on CATSA’s future directions, and to keep abreast of new and emerging threats, trends, technologies and techniques within aviation security that might have an impact on the Authority’s operations.

A few seats have remained unfilled for some time, and this could affect the Board’s effectiveness. Service on CATSA’s Board can be quite demanding: we were told they had 54 meetings over the last 18 months. Our examination led us to conclude that Board members take their role very seriously – most of them attend all the Board and committee meetings – and that the Board is exercising appropriate and effective oversight of this Crown corporation.

Members of the Board serve on a part-time basis (s. 14(1)), and are paid by the Authority according to remuneration fixed by the Governor in Council for each day that they attend meetings of the Board or any of its committees or perform other duties (s. 14(2)). They are reimbursed for reasonable travel and living expenses incurred in the course of performing their duties (s. 15).

The government’s Remuneration Guidelines for part-time appointees in Crown corporations were updated most recently in October 2000 ^{[ 7 ]} , and CATSA’s Chair and Directors are compensated according to this scheme ^{[ 8 ]} . The Guidelines set out ranges of per-diem rates and annual retainers. There are higher ranges for Board Chairs, and for Vice-Chairs (CATSA does not currently have a Vice-Chair). CATSA is considered a “Group 6” Crown corporation, in the same category as the Canada Deposit Insurance Corporation, the Cape Breton Development Corporation, the Farm Credit Corporation and the International Development Research Centre. It is in a higher category than the pilotage authorities, Marine Atlantic Inc. and the National Capital Commission, but at a lower level than VIA Rail, the CBC and Canada Post. The rates for members of the CATSA Board are as follows:

It appeared to the Panel that the level of remuneration provided to members of CATSA’s Board of Directors is too low, given the members’ qualifications, their fiduciary role in this particular industry and their liability. The government’s Advisory Committee on Senior Level Retention and Compensation (which has private- and public-sector members) provides advice and recommendations to Treasury Board about compensation for executives, deputy ministers, chief executive officers of Crown corporations and Governor in Council appointees (but not routinely for Directors and Chairs of Crown corporations). The Committee periodically reviews executive compensation to support the Government’s efforts to attract and retain qualified senior executives. In its Review of the Governance Framework for Canada’s Crown Corporations, the previous government announced 31 measures intended to improve accountability and transparency. The Review noted: “The increased involvement of boards in the provision of strategic guidance to Crown corporations, and the recognition of their responsibility for the performance and activities of their organizations, raises the question as to whether the compensation currently paid to directors should be reviewed.” ^{[ 9 ]} Measure #30 called for the Advisory Committee to do so.

6.1.3 The Chief Executive Officer

The Chief Executive Officer (CEO) of CATSA is appointed by the Board for a term of not more than five years. The appointment of the chief executive officer is renewable for one or more subsequent terms of not more than five years (s. 17). The CEO is responsible for the day-to-day management of the Authority (s. 18), and cannot be a member of the Board (s. 20).

The CATSA Act provides for its CEO to be appointed by the Board, rather than by the Governor in Council.

This innovation (something that was seen in 2002 as both forward-looking and responsive to the Auditor General’s recommendations re: best practices in corporate governance) has the effect of making the management of the corporation more distant from the government than is typical in a Crown, even though the corporation itself is more constrained by government control. It also means that the Board is expected to play a larger role than normal as the representative of the shareholder (i.e., the government) in overseeing and setting the direction for the business of the corporation. ^{[ 10 ]}

The Panel is satisfied with this process and notes that the Board is providing appropriate oversight through its Governance committee.

6.1.4 Relations with the Minister and accountability

Like other Crown corporations, CATSA reports to Parliament through a Minister (the Minister of Transport) for the conduct of its affairs. The issue of “reporting through” or “reporting to” is not trivial: in reporting to, there is an immediate authority that can make decisions about the mandate’s execution, change decisions and impose modes of execution that the responsible officials must follow; in reporting through, the Minister is answerable for the organization rather than accountable; he is a conduit, a means for reporting to Parliament, with limited formal authority to influence the corporation’s actions.

Nevertheless, in practice, the government has several effective levers for influencing or directing the behaviour of the Crown corporation. The annual process of the Corporate Plan and Budgets, which must first be signed by the Minister before it is submitted for Treasury Board consideration, is a powerful vehicle of effective control. After approval, the corporation prepares a summary of the Plan and Budgets, which must also be approved by the Minister before it is tabled in Parliament and referred to the appropriate Standing Committee. ^{[ 11 ]}

In addition, on the Minister’s recommendation, the Governor in Council may issue a directive to the Board, which must be tabled in Parliament within 15 sitting days. However, this power is rarely exercised and has not been used by the Minister of Transport to provide direction to CATSA. ^{[ 12 ]}

Finally, the Minister can influence the priorities of a Crown corporation by providing guidance to it in the form of a ministerial letter of expectations. The Treasury Board Secretariat report of its Review of the Governance Framework for Canada’s Crown Corporations recommended that:

To improve the communication of policy objectives and priorities from the government to Crown corporations, the responsible Minister will issue a statement of priorities and accountabilities to Crown corporations within his or her portfolio. The statement will be discussed beforehand with corporate management and the Board, but ultimately it will reflect the government's policy expectations for the corporation. The statement will be subject to an annual review and help form the basis for a periodic review of the corporation's performance.

This form of direction is meant to confirm mandates and business lines, to inform the corporation of the government’s priorities; to achieve consistency between government and corporation “regarding the government's priorities, policy objectives and performance expectations for a fixed period; and serve as a key driver in the development of the Crown corporation's corporate and/or strategic plans, annual reports and financial forecasts.” ^{[ 13 ]}

The Panel learned that the Minister of Transport issued a letter to the Chair of CATSA’s Board of Directors in August 2006. This letter set some expectations about priorities and offered general directions on which to focus. We understand that this was the first such letter issued by the Minister of Transport to a Crown corporation within his portfolio and we support this practice. To further strengthen the practice, we encourage Transport Canada to consult with the management or Board of the Crown corporation in advance, as recommended by the Treasury Board Secretariat Review.

6.1.5 Corporate planning

The Corporate Plan approval process is intended to be the key opportunity for the Minister to give policy guidance to CATSA. The corporate plan

is the centrepiece of the accountability regime adopted by Parliament for Crown corporations. This regime allows Crown corporations greater managerial autonomy than departments in order that they may pursue both commercial and public policy objectives efficiently and effectively with a minimum of government intervention. ^{[ 14 ]}

Drafts of CATSA’s Corporate Plan and Budgets are reviewed by Transport Canada officials, in order to prepare recommendations to the Minister for the Treasury Board. The process for CATSA has typically been very drawn out, and as a result, the Treasury Board has often approved CATSA’s budget many months after the start of the fiscal year for which it is intended. This in turn causes CATSA to re-profile or lapse funding that cannot be spent in the remaining months of the fiscal year.

The corporate planning process has been the source of considerable friction between CATSA and Transport Canada. In previous years, CATSA has sought to use the corporate planning process to seek new authorities, such as authority for cost recovery, or approval of pilot projects, such as the use of canine units for explosives detection. These requests were generally included without sufficient prior consultation with the department; they greatly slowed the process of review and approval, and were ultimately turned down. As a result, CATSA continues to function without the financial flexibilities granted to most other Crown corporations, departments and agencies.

CATSA does not appear to have succeeded in establishing a working relationship with the Treasury Board Secretariat that would enable the organization to function in an optimal way, and we urge CATSA to attend to this relationship. We were advised that there has been little continuity of TBS reviewers; CATSA has worked with six different TBS analysts in its first four years of operation. CATSA comments that the TBS reviews have often been “micro-detail oriented.” This appears to be very frustrating for CATSA (and Transport Canada).

There are also questions concerning which unit in Transport Canada is best positioned to perform this examination. Three different areas of Transport Canada have held this responsibility; in spring 2006, it was assigned to the Security and Emergency Preparedness Directorate (SEP), which has regulatory responsibility for CATSA. If CATSA remains a Crown corporation, it may be preferable to move responsibility for the review of the annual corporate plans to a unit with a wider policy perspective, such as Transport Canada’s Secretariat for Crown corporations or Transport Canada’s Policy Group.

There is a pressing need for CATSA and Transport Canada to develop a better working relationship around the development of CATSA’s annual Corporate Plan. We urge Transport Canada to assist CATSA in making its case to the Treasury Board for appropriate financial authorities, such as cost recovery for non-core services. We support CATSA’s initiative in proposing to test new screening approaches in pilot projects; CATSA should have the authority to proceed with these, within budget, and should be accountable for the results.

6.1.6 Relationships

To achieve its objectives, CATSA must maintain good working relationships with a wide range of partners. At the local airport level, key relationships include those with the airport management; with the air carriers; with the local police (who respond to incidents at the screening points); with its service provider, screening employees and their union; and with the Transport Canada inspectors.

Due to peak hour pressures, constraints imposed by the physical layout of the airport and the regulatory requirements, tensions are sometimes quite high among CATSA, Transport Canada and the industry. We have observed frustration on all sides. CATSA feels it is being impeded in its work. Transport Canada’s inspectors feel there is insufficient attention paid to security. Industry stakeholders feel there is a lack of understanding of their business constraints.

On the one hand, it is clear that CATSA operations affect airport revenues, since otherwise profitable space must be provided free of charge and retail outlets may lose business if passengers spend long periods in line-ups. When delays occur, this can also create costs for air carriers. On the other hand, the presence of security measures, such as passenger screening, is essential to the continuing health and development of the commercial aviation sector in the current threat environment. These measures appear to be with us to stay, and it is very much in the interest of the industry to facilitate CATSA’s operations so that any negative impacts on passengers’ travelling experience are minimized. For example, we observed that the space provided for pre-board screening in an airport and configuration of this space, as well as other support provided by the airport such as placement of greeters at the front of the screening line to direct passengers, can significantly affect throughput of passengers at the screening line.

Despite these constraints and pressures, we observed that, on the whole, CATSA regional managers have developed sound working relationships with most of their partners at the airport level. However, in our visits to airports across the country, we noted some friction between CATSA and its screening providers, on the one hand, and the Transport Canada inspectors, on the other. We observed, on both sides, that people were highly committed to their mission and conscientiously carrying it out.

The inspectors expressed frustration with the current situation in which they issue letters of contravention to CATSA for infractions of the detailed rules, but may not receive a timely reply. They may see little evidence of change, and sometimes disagreements arise over how the rules should be interpreted and applied. Occasionally, they have found that they were not backed up by headquarters. Some inspectors expressed concerns about how CATSA undertakes training and certification, concluding that, following a negative inspection report, screening officers may be recertified without proper retraining and testing. On the other hand, airport and airline stakeholders, as well as CATSA managers, expressed concerns about the inflexible and overly prescriptive nature of the rules enforced by the inspectors and, occasionally, the vigour with which they are applied. It appeared to us that some of Transport Canada’s inspectors (as well as some headquarters personnel) felt that their role had been diminished by the creation of CATSA and they appeared not to have fully accepted the role assumed by this new organization.

In our view, the singular focus of the regulatory enforcement regime on security objectives, when CATSA is required by its Act to also provide efficient and customer-oriented service, is one source of the friction that we observed. The detailed nature of Transport Canada’s oversight of the screening operations multiplies the occasions for disagreement between the inspectors and CATSA operational units. Transport Canada is in a position to alleviate these day-to-day tensions at the operational level by introducing a less prescriptive regulatory framework focused on strategic objectives, and by giving CATSA responsibility for operational policy, as proposed in Chapter 4. However, the boundary between strategic and operational policy is inevitably somewhat fluid and will require the two organizations to collaborate in a constructive way on an ongoing basis. As will be discussed later in this chapter, it is crucial that Transport Canada and CATSA clearly delineate their respective roles and ensure that employees at all levels in both organizations fully understand and observe this division of responsibility.

Currently, a small number of CATSA managers are spread rather thinly across the country. There are too few to provide effective oversight of the screening operations and to iron out all of the operational issues that can arise in all 89 airports. In fact, there are significantly more Transport Canada inspectors in the field than CATSA managers (although we recognize that they are also responsible for inspection of airlines and airports). Panel members observed at one screening point, via closed-circuit television, that the screening employees appeared to become much more diligent when a Transport Canada inspector arrived on the scene. We understand that CATSA is taking action to strengthen its regional management capacity and we support this initiative. In order to assume the operational responsibilities and accountabilities outlined later in this chapter, CATSA will have to significantly strengthen its quality assurance regime, so that compliance with its Standard Operating Procedures can be assured on the front lines.

At the national level, CATSA works closely with Transport Canada, the Canadian Airports Council, the Air Transport Association of Canada, the RCMP and the Canadian Airport Police Commanders Association. CATSA appears to have effective working relationships with the two main industry associations – CAC and ATAC – and very good relationships with the RCMP and Airport Police Commanders.

On the other hand, there appears to be a high level of frustration and mistrust between Transport Canada and CATSA at the national level. There seem to be two possible explanations for the tensions between CATSA and Transport Canada. Some see an inherent tension between CATSA’s status as a (nominally) arm’s length Crown corporation and its role as the provider of aviation screening and related services for the Government of Canada. This view implies that there is a real question as to whether continuance of the present organizational model is in the longer-term interest of the Government and the public. The second view is that while there is indeed a tension, it stems more from the unwillingness of Transport Canada to allow the full benefits of the current model to be realized. In this view, it is the constraints imposed on the Crown corporation model – rather than the model itself – that create the key issues to be addressed. ^{[ 15 ]} We will return to these issues later in this chapter.

CATSA’s communications and consultation processes were identified to the Panel as an area requiring further improvement by a number of stakeholders. We were advised that, on most issues, CATSA will consult on an ad hoc basis with some stakeholders. As CATSA assumes responsibility for operational policy and procedures, it will be important to have formal consultative mechanisms in place with key stakeholders to obtain their input on issues of national concern, including the development of performance indicators.

Input from the travelling public is equally important. Organizations representing disabled Canadians expressed concerns that their needs were not well understood or accommodated by front-line screening personnel. These groups recommended that CATSA draw on the expertise available on providing services to disabled persons in the design of its training programs. More generally, there is a need for CATSA to have regular input from the travelling public. An advisory group should be convened at least once a year to provide advice on customer service issues (including performance indicators), customer complaints and communications strategies.

Recommendation 6.1

We recommend that CATSA establish a national-level advisory committee, reporting to the Board of Directors, to represent the interests of the travelling public, including travellers with disabilities.

6.1.8 Financial and administrative arrangements

It appears that the financial controls applying to CATSA are, to say the least, unusual for a Crown corporation. The situation was summarized in a study by Sussex Circle: ^{[ 16 ]}

[T]he government has retained the ability to effectively control most if not all aspects of [a] Crown corporation, through its control of voted appropriations and the corporate plan approval process. These are “back door” controls, however, and exist in case of need. Not unlike the general power of government direction to a Crown corporation, many of these control levers are intended for exceptional use. In the present case, however, these control levers have been applied to CATSA with considerable vigour and appear to signal strongly opposing views of where decisions should be taken concerning CATSA’s operational direction. It is no overstatement to note that CATSA is not functioning now with the full range of authorities that would be normal for a Crown corporation, or any other federal agency.

The Panel notes that, as a Crown corporation, CATSA enjoys some administrative flexibility, including the authority to design its organizational structure, to classify its positions, to operate as a separate employer and to establish its human resources policies. As a Crown corporation, CATSA also has considerable flexibility in its contracting activities: the authority to design requests for proposals and to award contracts. This is important for an organization that delivers its core programs via service contracts, acquires and maintains hundreds of millions of dollars worth of high-technology screening equipment, and must have the contractual flexibility to act expeditiously when required.

In summary, CATSA is a Crown corporation with little independence from central agencies and Transport Canada, having less financial and operational authority than most other Crown corporations, agencies and departments. This is a Crown corporation structure for a very constrained organization, yet one that has to deal with highly sensitive mandates and has to demonstrate a high degree of responsiveness.

The key considerations related to effectiveness are whether CATSA has the authority to:

• determine its own operational policies within a strategic policy framework set by Transport Canada;

 
• raise revenues through fees to cover its operating costs (including costs associated with increasing passenger volumes);

 
• monitor and evaluate the effectiveness of its own screening programs, according to standards set by Transport Canada and subject to periodic audit by the department; and

 
• deal with international partners on matters within its service mandate.

None of these matters is a function of Crown corporation status or not. Indeed, … Crown corporation status ought, in principle, to be conducive to the fulfillment of these sorts of responsibilities, though under the present arrangement, it is not. ^{[ 21 ]}

Operational authority could be described as the capacity for an organization to make decisions in the operational domain that allows it to protect its interests and attain its objectives. For CATSA, these are primarily decisions concerning the operation of the screening function. CATSA, as well as the industry stakeholders, have asked for more operational flexibility:

• to operate within the basis of a Security Management Systems (SeMS)-based approach;

 
• to operate within a regime of less prescriptive PBS regulations;

 
• to operate within a more risk-based regulatory framework;

 
• to conduct its own infiltration tests with all needed material;

 
• to be able to conduct trials and manage the lifecycle of new equipment and screening techniques; and

 
• to benefit from less prescriptive Measures concerning screening officer rotation and resources at screening lines.

CATSA is accountable to Parliament through the Minister of Transport for effectiveness and efficiency in performing screening functions. Currently, there are few initiatives CATSA can take in this regard, since it must adhere to the Security Screening Orders (SSOs) approved by Minister of Transport on the advice of Transport Canada. There is some disconnect between responsibility and empowerment, due to a lack of operational flexibility: in effect, CATSA could be held responsible for decisions taken by Transport Canada. In short, while according to the Act, CATSA should be accountable for performing screening effectively and efficiently, it is now accountable only in respect to the regulations and orders, even if they are less than effective or efficient.

It was apparent to the Panel and to many stakeholders that clarification is needed concerning the operational mandates of CATSA and Transport Canada. While it is clear that the Department must retain the responsibility to establish national air transport security policy and to regulate accordingly, and for CATSA to execute the screening functions, clarity is needed on who should decide the operational policies and procedures needed to perform the roles assigned to CATSA as the operating authority. CATSA thinks it should determine the ‘hows,’ while Transport Canada insists they are to be determined within the SSOs. As a research report prepared Sussex Circle puts it: ^{[ 23 ]}

Rather, the roots of these sorts of problems lie in differing views of the respective places of Transport Canada and CATSA on the aviation security policy continuum. Or to put it in simpler terms, Transport Canada and CATSA need first to agree on who should be doing what…. Where these boundaries (policy as set in the strategic context at the departmental level and the operational policy established in an operating agency) are not clear or are not mutually accepted, the results are typically miscommunication, poor cooperation and all the inefficiencies and frustrations that result from that. This is what we have observed between CATSA and Transport Canada.

This issue calls for action at two levels: firstly, mutual acceptance of the mandate needs to be confirmed and practical cooperative mechanisms installed; secondly, the Act needs to be clearer about the respective weight to be placed on effectiveness and efficiency, and this needs to be addressed within a more results-based regulatory framework. There is also a need to rationalize and reconcile the Corporate Planning and Budget exercise, as well as development of the Minister’s Letter of Expectations.

Recommendation 6.4

(a) In order to carry out its mandate effectively, CATSA should be responsible and accountable for operational policy and decisions (including deployment of human resources and the lifecycle management of its assets), while Transport Canada would retain responsibility for overall aviation security policy, strategy and legislation.

(b) These responsibilities and accountabilities should be clearly communicated at all levels of both organizations, and their acceptance needs to be carefully monitored.

An important area of operational responsibility relates to decisions about capital equipment. CATSA employs more than $500 million worth of high-technology equipment in its screening operations across the country. Some of this equipment was inherited in 2002; most has been purchased since then, applying technical standards set by Transport Canada. It was important for Transport Canada to provide this technical expertise in CATSA’s early days. Now, however, the Crown corporation is in a position to assume responsibility for its capital program.

New technology options are rapidly becoming available and CATSA, as the operating agency, needs to be able to assess these options against the lifecycle costs and staffing implications of current equipment and approaches. To achieve optimal value-for-money decisions, we recommend that the operating agency – CATSA – be given responsibility for managing the full lifecycle of its capital equipment. This means that CATSA needs the capacity and authority to carry out research and development to assess the available options, to establish performance standards, to acquire and deploy new equipment, to maintain it and to plan for its replacement. Transport Canada should provide input via its review of CATSA’s Security Plan and Corporate Plan and Budget. CATSA would be accountable for achieving value for money in and for the security effectiveness of its decisions on capital equipment, as in all other areas of its operations.

Recommendation 6.5

CATSA should have full responsibility for the lifecycle management of its capital equipment, including research and development, procurement, maintenance and replacement.

6.3.2 Financial authority and accountability

An organization has financial flexibility when it commands sufficient funds, controls their allocation and the time period in which funds are expended, and determines how they will be used. CATSA and almost all the stakeholders have asked for an expansion of CATSA’s financial authorities. CATSA has requested non-lapsing funds through carry-forward and cost recovery, creating a contingency fund through a revolving fund or a net-voting authority, and an expedited budget mechanism to respond quickly to incidents. These requests are justified by the flexibility needed to finance operations and to adapt to specific and evolving threats. The Panel agrees that it is an unfortunate practice when CATSA must reduce staff on the pre-board screening lines or limit overtime in the last months of the fiscal year in order to balance its budget. Nor does the Panel accept that limitations on overtime staffing, solely for budgetary reasons, are reasonable in times of a specific threat to air security. The Panel also thinks that CATSA should have the authority to deploy resources according to the requirements of its mandate. Sussex Circle observed that

It is not uncommon for departments and agencies to have the ability to reallocate resources, to have a determining voice in the acquisition of capital equipment (within limits), and certainly to manage the deployment and location of human resources. It is increasingly common for departments and agencies to have net-voting authority. ^{[ 24 ]}

The Panel is of the view that, whether CATSA is a Crown corporation or becomes a departmental corporation, it is important that certain financial authorities be provided, so that:

• CATSA’s appropriations recognize the impact of changes in traffic volume on its costs incurred;

 
• CATSA may conduct cost recovery and revenue generation activities, under certain conditions;

 
• CATSA may carry forward unused capital and operating funds, preferably as non-lapsing appropriations;

 
• CATSA may move funds from one budget item to another; and

 
• CATSA may make urgent budgetary decisions when needed, under the proper controls.

Recommendation 6.6

We recommend that CATSA’s budget reflect passenger volumes as well as productivity gains realized from enhanced technologies and procedures. CATSA should also be provided with the capacity to generate revenues, to recover costs in line with federal government policies, to carry forward operating funds, to re-profile capital and to transfer operating funds between budget items. These flexibilities should be awarded once CATSA has demonstrated it has the appropriate procedures and systems in place.

Administrative flexibility may be described as an organization’s capacity to make decisions in the administrative domain that allow it to protect its interests and attain its objectives. These may include spending plans outlined in the annual corporate plan, such as pilot projects; spending decisions, such as purchase of equipment; and human resources management.

As mentioned above, as a Crown corporation, CATSA has greater administrative flexibility than a government department or agency. It is, by definition, a separate employer with its own organizational structure, rates of pay and relations with employees. It also has considerable latitude in its approach to contracting, provided it demonstrates probity and achieves value for money. This is particularly important to an organization that purchases and maintains expensive capital equipment and that delivers its core programs through service contracts. As an organization of government with significant contracting responsibilities, CATSA should aim to become a leader in contract management.

If CATSA becomes a departmental corporation, it could lose these administrative flexibilities, unless they are expressly granted by the Treasury Board.

Recommendation 6.7

We recommend that, if CATSA becomes a departmental corporation, it remain a separate employer, be granted the same contracting authorities that it has as a Crown corporation and the maximum administrative flexibilities allowed for under the Financial Administration Act.

Transport Canada’s oversight of CATSA’s corporate planning process has created administrative limitations, in that CATSA has been discouraged from, or indeed prevented from, pursuing innovative ideas for the delivery of its programs. One example is its proposal to test the feasibility of using canine units to supplement the detection capability of its existing equipment. Without commenting on the merits of this particular proposal, we observe that CATSA needs to have the operational and administrative room to explore and test alternative methods in order for innovation to take place. This means that it should be encouraged to undertake appropriate pilot projects, in consultation with its partners, and assume full accountability for the results achieved.

Chapter Six: Footnotes