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Arms-length Government Agencies
May. 29th, 2014 03:54 pmEvery government has a set of arms-length bodies. Sometimes these are regulatory bodies which report ultimately through the civil service (consider the SSHRCC); where there is likely to be significant infrastructure these will be Crown Corporations or the equivalent.
The history of Crown Corporations can be traced back at least to the East India Company and the Hudson's Bay Company, although these were more in the nature of private monopolies supported by the Crown. In Ontario, the archetypal Crown Corporations are the Hydro-Electric Power Commission of Ontario, founded in 1906 under Adam Beck (a bit of a hybrid) and the Liquor Control Board of Ontario, founded in 1927.
eHealth is a Crown Corporation created by regulation under the Development Corporations Act. ORNGE is incorporated under the Canada Corporations Act. TCHC is an agency of the City of Toronto. The Sony Centre for the Performing Arts is "an arms-length agency" of the City of Toronto.
It's worth noting that many of the scandals in governance at the city and provincial level in the last few years have not been in any sense what one could refer to as government "corruption". They've been perceived or real failures in arms-length governance -- situations where a broadly independent organization spends / "wastes" (sometimes the waste may be more perceived than actual, depending on one's position, especially when it comes to staffing or salary levels) funds in a way which later comes to the attention of the level of government to which it reports.
It's clear that there are an number of factors at work here. The arms-length character of these relationships encourages the operation of the SNAFU principle. The tendency (present in all sorts of private as well as public organizations) for projects to be lowballed and then have high cost overruns is lurking. Some special circumstances mix in (eHealth operates in an area where really big screwups are legendary: note the experiences the UK has had with health databases); the TCHC waltzes on the edge of permanent critical coverage because of gross underfunding). In some cases, a more private than public sector ethos can take hold, leading to perquisites or behaviour which would be less problematic (if problematic at all) in the private sector but make waves in the public sector (this is especially true of salaries/bonuses, tendering practices, and consultancy relationships).
There's a permanent tension between the forces which make these arms-length organizations in the first place (and there's no stripe of government which doesn't go down this route; even the PC's hedge on selling the LCBO) and the need for effective feedback loops regarding (especially) financial responsibility and regulatory compliance.
Is "overspending" in this context a governmental problem? Certainly. Can it be fairly characterised as "government waste"? We're starting to walk on the edge here: these are governmental agencies, and these concerns do involve money used less than effectively. However, by the very nature of their arms-length nature, they have local problems, not overall government wastefulness (at an overall level they can reflect the opposite of waste -- underresourcing in the parts of the permanent civil service which should be carrying out more active oversight of these groups: there are well over 500 in Ontario's list of Crown Agencies: although many of these are boards with little financial scope, all require some degree of oversight).
Likewise, cronyism at the level of government appointment of members of boards and CEOs is a legitimate "government" (i.e. cabinet and legislative) issue (although no party really tries to appoint an impartial civil service at this level, so when this gets into politics, it's frequently a pot, kettle kind of argument). Cronyism within an arms-length body (frequently showing up as irregular hiring or tendering practices) is a less generalisable problem.
So where is all this heading? Well, I see a lot of throwing around of these sorts of scandals: eHealth and ORNGE continue to be brought up in the provincial election campaign, and just yesterday we had reports of the Toronto Audit Committee recommending replacing the O'Keefe^H^H^H^H^H^HSony Centre board as a result of project overruns and poor documentation of expenses. (Perhaps ironically, we have the same issues coming up with the Union Station renewal, where the issue seems to be that the project is too big for the city to oversee effectively. Well, there are many kinds of oversight problems possible.) But nobody wants to talk about oversight models. Perhaps understandably: there are reasons these bodies are arms-length, and setting up oversight mechanisms (with appropriate staffing and reporting models) which will avoid these sorts of surprises while maintaining a quasi-independence is likely to be complicated and probably relatively costly in ongoing person-hours. (Let me repeat that note regarding cost. It's a bit like monitoring travel expenses: many organizations have now gone with straight per diems without requiring receipts because in the normal case it's more expensive to retain and audit receipts than it is to catch the few employees who do pad their reports. If we set up careful feedback loops which monitor every arms-length group extra-carefully to catch the relatively few real problems early on with the attendant micro-management that entails, that will cost extra.)
Our existing audit mechanisms do catch these problems (which is why we hear about them in the first place). It may be worthwhile to change our oversight model with regard to arms-length bodies; but I don't see anybody, including people who are complaining about it, stepping up with alternative models of oversight ready to discuss them.
The history of Crown Corporations can be traced back at least to the East India Company and the Hudson's Bay Company, although these were more in the nature of private monopolies supported by the Crown. In Ontario, the archetypal Crown Corporations are the Hydro-Electric Power Commission of Ontario, founded in 1906 under Adam Beck (a bit of a hybrid) and the Liquor Control Board of Ontario, founded in 1927.
eHealth is a Crown Corporation created by regulation under the Development Corporations Act. ORNGE is incorporated under the Canada Corporations Act. TCHC is an agency of the City of Toronto. The Sony Centre for the Performing Arts is "an arms-length agency" of the City of Toronto.
It's worth noting that many of the scandals in governance at the city and provincial level in the last few years have not been in any sense what one could refer to as government "corruption". They've been perceived or real failures in arms-length governance -- situations where a broadly independent organization spends / "wastes" (sometimes the waste may be more perceived than actual, depending on one's position, especially when it comes to staffing or salary levels) funds in a way which later comes to the attention of the level of government to which it reports.
It's clear that there are an number of factors at work here. The arms-length character of these relationships encourages the operation of the SNAFU principle. The tendency (present in all sorts of private as well as public organizations) for projects to be lowballed and then have high cost overruns is lurking. Some special circumstances mix in (eHealth operates in an area where really big screwups are legendary: note the experiences the UK has had with health databases); the TCHC waltzes on the edge of permanent critical coverage because of gross underfunding). In some cases, a more private than public sector ethos can take hold, leading to perquisites or behaviour which would be less problematic (if problematic at all) in the private sector but make waves in the public sector (this is especially true of salaries/bonuses, tendering practices, and consultancy relationships).
There's a permanent tension between the forces which make these arms-length organizations in the first place (and there's no stripe of government which doesn't go down this route; even the PC's hedge on selling the LCBO) and the need for effective feedback loops regarding (especially) financial responsibility and regulatory compliance.
Is "overspending" in this context a governmental problem? Certainly. Can it be fairly characterised as "government waste"? We're starting to walk on the edge here: these are governmental agencies, and these concerns do involve money used less than effectively. However, by the very nature of their arms-length nature, they have local problems, not overall government wastefulness (at an overall level they can reflect the opposite of waste -- underresourcing in the parts of the permanent civil service which should be carrying out more active oversight of these groups: there are well over 500 in Ontario's list of Crown Agencies: although many of these are boards with little financial scope, all require some degree of oversight).
Likewise, cronyism at the level of government appointment of members of boards and CEOs is a legitimate "government" (i.e. cabinet and legislative) issue (although no party really tries to appoint an impartial civil service at this level, so when this gets into politics, it's frequently a pot, kettle kind of argument). Cronyism within an arms-length body (frequently showing up as irregular hiring or tendering practices) is a less generalisable problem.
So where is all this heading? Well, I see a lot of throwing around of these sorts of scandals: eHealth and ORNGE continue to be brought up in the provincial election campaign, and just yesterday we had reports of the Toronto Audit Committee recommending replacing the O'Keefe^H^H^H^H^H^HSony Centre board as a result of project overruns and poor documentation of expenses. (Perhaps ironically, we have the same issues coming up with the Union Station renewal, where the issue seems to be that the project is too big for the city to oversee effectively. Well, there are many kinds of oversight problems possible.) But nobody wants to talk about oversight models. Perhaps understandably: there are reasons these bodies are arms-length, and setting up oversight mechanisms (with appropriate staffing and reporting models) which will avoid these sorts of surprises while maintaining a quasi-independence is likely to be complicated and probably relatively costly in ongoing person-hours. (Let me repeat that note regarding cost. It's a bit like monitoring travel expenses: many organizations have now gone with straight per diems without requiring receipts because in the normal case it's more expensive to retain and audit receipts than it is to catch the few employees who do pad their reports. If we set up careful feedback loops which monitor every arms-length group extra-carefully to catch the relatively few real problems early on with the attendant micro-management that entails, that will cost extra.)
Our existing audit mechanisms do catch these problems (which is why we hear about them in the first place). It may be worthwhile to change our oversight model with regard to arms-length bodies; but I don't see anybody, including people who are complaining about it, stepping up with alternative models of oversight ready to discuss them.
