What we examined (see Focus of the audit)

Ridley Terminals Inc. is a marine terminal at Prince Rupert, British Columbia, offering year-round services of loading and off-loading bulk commodities, such as coal and petroleum coke. It aims to be a terminal that allows Canadian products to reach world markets. Ridley Terminals is a federal Crown corporation established in 1981 under the Canada Business Corporations Act.

The Corporation’s mandate is to construct, own, and operate docks, terminals, elevators, warehouses, storage facilities, and equipment to store and deliver bulk commodities. The Corporation’s main customers are coal mines and refineries in northern British Columbia, Alberta, and Saskatchewan.

The Corporation does not receive funding from Parliament. It operates as a business, charging fees for its services and reinvesting revenues into its operations.

Our objective for this audit was to determine whether the systems and practices we selected for examination at Ridley Terminals Inc. provided the Corporation 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, there were significant deficiencies in Ridley Terminals Inc.’s systems and practices that we examined for governance, strategic planning, performance measurement and reporting, risk management, and human resources. As a result of the pervasiveness of these 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 about…

Corporate governance

Overall, we found significant deficiencies in Ridley Terminals Inc.’s governance, strategic planning, performance measurement and reporting, risk management, and human resource systems and practices. The Board did not meet its key responsibilities and failed to oversee the management of the Corporation. For example, the Board went outside the Governor in Council appointment process and hired a President and Chief Operating Officer on contract at a higher level of remuneration than the one set for Governor in Council appointees. The Board also approved and entered into an agreement for a 20-year diversification project even though the project had not been approved in advance by the government.

This finding matters because strong oversight by the Board is vital to the Corporation’s ability to manage operations, given that its sale status is unclear. Management of operations includes the ability to manage risk and to avoid engaging in long-term agreements that may not be in line with the government’s strategy and the Financial Administration Act.

• The Board did not fulfil its oversight role

  Recommendation. The Board and its committees should ensure that they fulfill all their responsibilities. These include reviewing their terms of reference and establishing frameworks for performance measurement and risk management.

  Recommendation. The Corporation should continue to engage with the Minister of Transport on the need to appoint in a timely way the required number of members to the Board. It should also comply with the Financial Administration Act and Governor in Council requirements for the President and Chief Executive Officer position.

  Recommendation. The Corporation should work with the Department of Transport and the Treasury Board Secretariat to clarify when and how it needs approval for decisions to diversify its activities.

  Recommendation. The Corporation should document its succession planning for senior management and other critical positions as well as comply with its hiring policy to meet best practices and government processes. The Corporation should also consider explaining and disclosing in its annual report its compensation framework.

Department of Transport’s oversight

Overall, we found that the Department of Transport’s oversight of Ridley Terminals Inc. was insufficient in some important areas. For example, the Department did not ensure that the Corporation followed the Governor in Council appointment process when it knew that the Corporation intended to hire a new President and Chief Operating Officer outside of that process. The Department also did not submit corporate plans to the Treasury Board for approval, resulting in the Corporation’s operating without government approval. Although the Corporation discussed with the Department of Transport its intentions to diversify, the Department was unable to provide any documentation to show that it had provided any guidance or advice to the Corporation on signing an agreement for its diversification project. The Department further failed to support the Corporation by not clearly communicating whether Ridley Terminals Inc. was still for sale or not.

This finding matters because the Department of Transport’s lack of oversight and clear strategic direction hindered the Corporation in its ability to make decisions about its future while operating within its authority.

• The Department of Transport did not support the Corporation in some important areas

  Recommendation. The Department of Transport should work with the Corporation to review whether the remuneration level of its President and Chief Executive Officer is appropriate for the position and to appoint the position through the Governor in Council process.

  Recommendation. The Department of Transport should clearly inform the Corporation on the status of its sale.

Entity Responses to Recommendations

Ridley Terminals Inc. 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 Business and Industry Transportation
Entities	Ridley Terminals Inc.
Completion date	26 January 2018
Tabling date	21 February 2018

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