What we examined (see Focus of the audit)

The Atlantic Pilotage Authority (the Corporation) is a federal Crown corporation established in 1972. It reports to Parliament through the Minister of Transport and is one of four pilotage authorities established under the Pilotage Act.

The Corporation’s mandate is to establish, operate, maintain, and administer in the interests of safety an efficient pilotage service within designated regions. The Pilotage Act grants a monopoly to the Corporation to provide pilotage services in all Canadian waters in and around the provinces of Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, and certain waters of Chaleur Bay in Quebec.

Our objective for this audit was to determine whether the systems and practices we selected for examination at the Atlantic Pilotage Authority were providing it with reasonable assurance that its assets were safeguarded and controlled, its resources were managed economically and efficiently, and its operations were carried out effectively as required by section 138 of the Financial Administration Act.

We selected systems and practices on the basis of our assessment of risks in the following areas:

• corporate management practices, and
• management of pilotage services.

What we concluded

In our opinion, based on the criteria established, there were significant deficiencies in the Atlantic Pilotage Authority’s systems and practices that we examined for corporate management and the management of pilotage services. As a result of the pervasiveness of the significant deficiencies, we concluded that the Corporation had not maintained these systems and practices during the period covered by the audit in a manner that provided the reasonable assurance required under section 138 of the Financial Administration Act.

What we found

Corporate management practices

Overall, we found that the Board of Directors, despite having strong competencies, did not set strategic direction for the Corporation, nor had it reviewed its mission, vision, or strategic objectives since 2003. Strategic direction is integral to ensuring the Corporation’s financial self-sufficiency. For three of the past four years, the Corporation reported operating losses.

This finding matters because effective strategic direction articulates where an organization is going, the actions needed to make progress—for example, to anticipate and adopt changes in marine technology—and how the organization will measure success. Otherwise, management cannot develop and execute plans proactively, and must react to situations when they arise, as the Corporation did by implementing a tariff surcharge in response to continued operating losses.

• There was a significant deficiency in corporate management practices

  Recommendation. The Board should ensure that its members comply with all provisions of the Corporation’s conflict of interest code, including the requirement to provide written disclosure to the Chairperson of all business and commercial interests where such interests might be construed as being in actual or potential conflict with their duties as Board members, so that appropriate mitigations can be put in place.

  Recommendation. The Corporation should periodically review its mission, vision, and strategic objectives. The Corporation should ensure that its strategic objectives are easily measured and assign responsibility to specific managers for achieving them. The Corporation should also establish expected results for the strategic objectives and link them to management’s performance objectives.

  Recommendation. The Corporation should ensure that its tariff- setting processes take into account its legislated requirement to be financially self-sufficient.

  Recommendation. The Corporation should regularly monitor implementation of its risk mitigations and formalize its reporting on these mitigations to the Board.

Management of pilotage services

Overall, we found that, despite its history of having few safety incidents, the Corporation needs to formalize and fully implement systems and practices that would demonstrate that it has been diligent in maintaining its pilotage operations. Doing so would minimize the risk of compromising the Corporation’s record in the future.

This finding matters because strong systems and practices are necessary to the Corporation’s delivery of its mandate, which includes prevention of possible harm to pilots, users, and the environment.

• There were significant deficiencies in the management of pilotage services

  Recommendation. The Corporation should implement information management that facilitates its ability to demonstrate the health and competence of its pilots and pilot boat crews.

  Recommendation. The Corporation should ensure that documented contracts are in place with entrepreneurial pilots to specify the terms and conditions of pilotage service delivery.

  Recommendation. The Corporation should formalize its good practice of requiring consensus among its committees of senior pilots before advancing the licences of trainee pilots. The Corporation should maintain documentation of this consensus, along with the final recommendation letter issued by the committee chairperson.

  Recommendation. The Corporation should ensure that it fully implements and consistently applies a performance management process for all pilots and pilot boat crews. The Corporation should also assign responsibility for reviewing performance management information, with the aim of ensuring proper oversight and follow-up of actions.

  Recommendation. The Corporation should implement a cyclical review to demonstrate reconsideration of the designation of every compulsory pilotage area under its responsibility at least once every five years. The periodic review should also demonstrate reconsideration of the size and types of vessels subject to compulsory pilotage. The Corporation should also ensure that recommendations from preliminary risk analyses of non-compulsory pilotage areas are addressed promptly.

  Recommendation. The Corporation should perform annual inspections on all pilot boats, owned and contracted.

Entity Responses to Recommendations

The Atlantic Pilotage Authority agrees with our recommendations, and has responded (see List of Recommendations).

Related Information

Report of the	Auditor General of Canada
Type of product	Special Examination
Topics	Crown Corporations Financial Management and Government Spending
Audited entities	Atlantic Pilotage Authority
Completion date	10 August 2016
Tabling date	25 August 2016
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