What we examined (see Focus of the audit)

Ferry service in Newfoundland and Labrador has a long history. It became a federal responsibility when Newfoundland joined Canada in 1949. This responsibility has passed through several organizations over seven decades and now rests with Marine Atlantic Inc. Most goods—from food and retail products to medical supplies and construction materials—arrive in Newfoundland by ferry. Tourism, a major industry in the province, depends on the ferry service, as do the province’s residents. Harsh weather and maintenance issues can disrupt what many Newfoundlanders see as a vital transportation link.

Marine Atlantic Inc. became a Crown corporation in 1986 as a result of the Marine Atlantic Inc. Acquisition Authorization Act. In 1995, the National Marine Policy narrowed the Corporation’s mandate to the operation of a ferry system. The Corporation reports to the Minister of Transport.

Our objective for this audit was to determine whether the systems and practices we selected for examination at Marine Atlantic Inc. 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.

Overall message

Overall, we found that Marine Atlantic Inc. had good practices in place to oversee the running of the Corporation and to manage its operations.

Nonetheless, we were concerned that the Corporation was not able to make long-term strategic decisions because of circumstances outside its control—specifically, delays by the government in approving the Corporation’s full five-year corporate plans. We reported this issue in our 2009 special examination, and we found it to be a significant deficiency in the current audit.

This is important because the Corporation relies on the government’s approval and funding to maintain and replace its fleet of vessels. If the government does not approve the Corporation’s long-term fleet-renewal strategy, the Corporation can address only the fleet’s short-term needs. This lack of long-term strategic direction affects the Corporation’s core operations. It will become more problematic as time goes on, because repairing and maintaining aging vessels will eventually cost more than replacing them. The Corporation has also stated that it takes a minimum of four years to acquire a new vessel.

We also found that the Corporation did not have a clear understanding of the formula used to assess cost recovery for its non-constitutional services, including its seasonal service route to Argentia. This weakness matters because if the Corporation and the government do not have a common understanding of the cost-recovery formula, the calculation could misrepresent whether the Corporation had achieved its cost-recovery target.

Finally, we found that the Corporation did not have an environmental management plan. Implementing a plan that sets out the Corporation’s environmental objectives would allow the Corporation to monitor its performance and operate in an environmentally responsible manner—a key point of its mission statement.

What we found about …

Corporate management practices

• There was a significant deficiency in corporate governance, and some corporate management practices needed improvement

Management of safety and ferry operations

• The Corporation had good systems and practices for managing safety and ferry operations, but some improvements were needed

Entity Responses to Recommendations

The Corporation 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 Safety and Security Transportation
Entities	Marine Atlantic Inc.
Completion date	22 November 2018
Tabling date	7 December 2018

For more information

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