What we examined (see Focus of the audit)

Atomic Energy of Canada Limited is a federal Crown corporation, reporting to Parliament through the Minister of Natural Resources. The Corporation’s mandate is to enable nuclear science and technology and fulfill Canada’s radioactive waste and decommissioning responsibilities. It receives federal funding and delivers its mandate through long-term contracts with a private-sector contractor for the management and operation of its sites.

The private-sector contractor selected was the Canadian National Energy Alliance (CNEA). With the completion of restructuring, the Corporation transferred ownership of its subsidiary, Canadian Nuclear Laboratories (CNL), to the CNEA. Under a Government-owned, Contractor-operated model, the Corporation delivers its mandate through long-term contracts with both the CNEA and CNL, together called “the contractor”. The Corporation retains ownership of all lands, facilities, intellectual property, other assets, and liabilities.

Our objective for this audit was to determine whether the systems and practices we selected for examination at Atomic Energy of Canada Limited 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.

What we concluded

In our opinion, based on the criteria established, with the exception of the significant deficiency we found in Board renewal, there were no significant deficiencies in Atomic Energy of Canada Limited’s systems and practices that we examined for corporate management and contract management. We concluded that the Corporation has 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, except for a significant deficiency in Board renewal and some other improvements needed, the Corporation had in place good corporate management practices. The significant deficiency related to the delays in the appointment of Board members, over which the Corporation did not have control. During the period covered by the audit, the Corporation was operating with an interim Board and without a President and Chief Executive Officer while developing long-term strategic plans. In addition, the Board had not yet implemented a formal, systematic process for monitoring and reporting on the risks identified in the corporate risk register.

These findings matter because this is a critical time for the Corporation, when it is attempting to set its direction for the next 10 years and beyond. To do this, it is important to have a full complement of Board members with an appropriate mix of skills and appropriate terms, who can guide the development of long-term, comprehensive strategic plans. Delays in appointing new Board members and the President and Chief Executive Officer can have an impact on their understanding and ownership of the Corporation’s strategic direction, including their ability to oversee its implementation. It is important as well for the Board to closely monitor risks, particularly during early implementation of a new business model involving a contractor. Continuing leadership from the Board and the Chief Executive Officer protects against the risk of not being able to achieve the initial goal of restructuring—that is, to leverage the experience and capabilities of the private sector in order to enhance efficiency and effectiveness, and to contain and reduce costs and risks for Canadians over time.

• Except for a significant deficiency in Board renewal and some other improvements needed, the Corporation had in place good corporate management practices

  Recommendation. The Corporation should continue to engage with the Minister of Natural Resources on the need for the timely appointment of the President and Chief Executive Officer and of a full complement of members to its Board of Directors. It should also reinforce the need for staggered terms of office to ensure continuity.

  Recommendation. The Corporation should plan for an orderly transition, during which the newly appointed Board members and the President and Chief Executive Officer have the opportunity to familiarize themselves with the initial goal of restructuring; the resulting Government-owned, Contractor-operated arrangement; and the Corporation’s strategic plans. They should also have the opportunity to provide guidance on modifying and implementing the plans.

  Recommendation. The Board should strengthen and improve its process for monitoring and reviewing risks listed in its risk register and should appropriately document discussions and actions.

  Recommendation. The Corporation should develop a more detailed reporting framework so that it can better measure and demonstrate to Canadians that it is enhancing efficiency and effectiveness, and is containing and reducing costs and risks over time. The Board should hold periodic public meetings, as required by the Financial Administration Act, to present its annual report and provide information on the Government-owned, Contractor-operated model.

  Recommendation. The Corporation should address the alignment in remuneration by engaging with the Minister of Natural Resources. In its annual report, it should consider providing additional insight and disclosure concerning its compensation framework.

Contract management

Overall, we found that despite the challenges it faced throughout its transition to a Government-owned, Contractor-operated (GoCo) business model, the Corporation did a good job in implementing systems and practices to monitor its GoCo arrangement. However, we found that the Corporation still faced challenges in acquiring a contracting team with the necessary skills and competencies to monitor the GoCo model.

This finding matters because under a GoCo model, which is relatively new to the Canadian nuclear sector, the contract management team must have a sufficient number of staff members who are qualified to oversee operations and properly manage contract performance.

• The Corporation had good contract management practices, but improvement was needed in the area of skills and competencies

  Recommendation. The Corporation should strengthen the skills and competencies of the contract management team to manage the overall performance of the contractor in the context of the Government-owned, Contractor-operated model.

Entity Responses to Recommendations

Atomic Energy of Canada Limited 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
Entities	Atomic Energy of Canada Limited
Completion date	23 May 2017
Tabling date	13 June 2017

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