Correct.
Evidence of meeting #73 for Fisheries and Oceans in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was board.
A recording is available from Parliament.
Evidence of meeting #73 for Fisheries and Oceans in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was board.
A recording is available from Parliament.
9:25 a.m.
Conservative
Mel Arnold Conservative North Okanagan—Shuswap, BC
Can you clarify how that may work for the harvesters?
9:25 a.m.
Principal, Office of the Auditor General
If Manitoba withdraws from its participation, then it would be an open market for the fishers. The fishers could sell to whomever they choose. The private sector or the corporation could purchase. The corporation would no longer be obligated to purchase all of the catch, so they could pick and choose how much, which species, which size, and so on, which is what they do with Saskatchewan.
Saskatchewan withdrew in 2012 from the act. They sell under contract to the corporation, and the same could happen.
9:25 a.m.
Conservative
Mel Arnold Conservative North Okanagan—Shuswap, BC
As part of your audit, would you look at how that may affect harvesters in remote locations, or is that up to the board to decide and you to decide how the board would handle that?
9:25 a.m.
Assistant Auditor General, Office of the Auditor General
As part of our audit we would not look into the future implication of that. That would be the responsibility of management in terms of executing their responsibilities, and also the government at large to consider the broader macroeconomic impacts.
9:25 a.m.
Conservative
9:25 a.m.
Conservative
9:25 a.m.
Conservative
Larry Miller Conservative Bruce—Grey—Owen Sound, ON
You have four provinces, unless I missed one, three provinces and a territory. Was Ontario ever part of this?
9:25 a.m.
Principal, Office of the Auditor General
A portion of northern Ontario was part of the act, but they withdrew in 2011.
9:25 a.m.
Conservative
Larry Miller Conservative Bruce—Grey—Owen Sound, ON
They withdrew in 2011.
My final question, and I'll be brief, is whether the thing is really viable. It appears that the only one left is the Northwest Territories, the Arctic.
9:25 a.m.
Assistant Auditor General, Office of the Auditor General
If Manitoba withdraws, there would be the one territory remaining. The question of whether that is viable is something we can't answer.
9:25 a.m.
Liberal
The Chair Liberal Scott Simms
Thank you very much.
Just for clarification on the Northwest Territories, but you say Alberta is officially a member; it's just that they do not prosecute a commercial fishery.
9:30 a.m.
Liberal
The Chair Liberal Scott Simms
Right.
Thank you very much, Mr. MacLellan and Ms. McManaman.
We're going to break for a few minutes, folks.
Thank you.
9:32 a.m.
Liberal
The Chair Liberal Scott Simms
I welcome everyone back to the second part of our study on the Freshwater Fish Marketing Corporation, in response to the spring 2017 reports of the Auditor General of Canada.
Joining us right now, from the Freshwater Fish Marketing Corporation, we have the chairperson, and as the expression goes, someone who is no stranger to this committee, David Bevan. Also, we have the interim president, Stan Lazar.
Gentlemen, we thank you for taking the time and travelling to be with us this morning.
You have an opening statement. Do both of you want to make a statement, or just one of you?
October 31st, 2017 / 9:32 a.m.
David Bevan Chairperson, Board of Directors, Freshwater Fish Marketing Corporation
Just myself.
9:32 a.m.
Chairperson, Board of Directors, Freshwater Fish Marketing Corporation
That's correct.
9:32 a.m.
Chairperson, Board of Directors, Freshwater Fish Marketing Corporation
Thank you, Mr. Chair, and thank you for the opportunity to respond to the special examination of the Office of the Auditor General.
As they noted, we have accepted the recommendations, indeed. Many of the recommendations and observations were being reported by the board members to the Government of Canada at the time of the audit and before the audit was completed. We have implemented almost all the recommendations for which we have full authority to do so. We are still working on the recommendation to have all the policies of the board communicated to the employees of the corporation, and that should be done by December. We are working with the Government of Canada on those recommendations for which they have the authority to implement and we don't.
We have a risk committee in place. We have a new board member who is the chairperson of that committee, and I have written to the Government of Canada requesting that the Government of Canada appoint board members to fill the vacancies that still remain on the board.
The audit took place at a very difficult time for the corporation. Before the audit started, many board members had been communicating to the Government of Canada that they had concerns with the operation of the corporation. The Auditor General confirmed many of the points raised by the board members. The Government of Canada took action as a result of those contacts with board members, and in March 2016 removed the president at the time, and, as noted, he was dismissed with cause later in 2016.
Also, the government appointed three new members, me as the chairperson, and two others, one of whom was John Wood, a former president. He acted as an interim president pending his decision to remove himself from that position in February 2017, and Stan has been serving as interim president since then.
We certainly had quite a challenge when we took on the responsibility, myself as chair and John as the interim president. There were a number of things that had to be corrected, as noted in the special exam. I'd like to spend a few minutes on the slide deck that was sent to you, if I may.
As noted by the Auditor General, Freshwater Fish was formed in 1969. Many of the conditions that existed then persist to this day. We are the buyer, processor, and marketer of approximately 15 million kilograms of fish that come from Manitoba, Saskatchewan, and the Northwest Territories, and we still have one fisher in Ontario. We buy from 1,600 fishers, 80% of whom are from isolated northern communities, and they are mostly indigenous. We operate a supply chain that moves products into those communities to aid with the fishery, and then moves the fish back out and on to markets. Our sales have averaged $73.5 million over the last three years. We have 250 full-time and 150 part-time employees.
I'll just skip to the Freshwater Fish Marketing Corporation Auditor General's 2010 special exam recommendations. A retained earnings and debt management policy needed to be implemented, and they were. An audit committee was established, led by a board member with professional credentials, and that was in place. An integrated risk management plan was developed and approved by the board. Until the time of the audit, that had been maintained. The board profile was changed so that we had less representation and more professional people on the board. Contracting and procuring policies were strengthened.
The most recent audit, as noted, took place between October 2015 and June 2016. As noted, the president at that time failed to follow many of the policies and procedures that were implemented between 2010 and the time of the audit. The chairperson of the board, whose term was supposed to go into late 2016, resigned. Under the Freshwater Fish Marketing Act, when there's no chairperson, the president becomes both the president and the chair. I think you can appreciate that this is not ideal governance, to say the least. Board members had no alternative but to directly communicate with the Government of Canada. The Government of Canada took action by removing the president and putting in place new board members.
Again, the point is that the government did take action, however, that action did not result in an immediate turnaround. We had a huge whitefish inventory and that was our biggest risk when we took over. We had to re-establish proper human resources because we didn't have all the skill sets we needed to get on with the management of the corporation.
The next slide gives you an idea of where we spend money to procure fish and where we sell the fish.
The next slide is on key performance indicators. The year after the audit, our profits were up to $7.6 million, before our final payment. Our retained earnings are up to $15 million, which is higher than our long-term debt. Our long-term debt is $12.5 million. So we have more than enough to cover our long-term debt. We increased our gross sales, improved on cost per kilogram for processing, and we maintained fish volumes.
For this fiscal year our profits, after tax but before any final payments to fishers, are up to $4.3 million for the first quarter, as compared to $2 million for the previous year and compared to $1.5 million in the plan. Our performance is strong because of sales volume, strong revenue, competitive market pricing, and control of expenses. We're on track to achieve the goals that are in our corporate plan for 2017 to 2022.
The next slide shows that when we saw the change in the policy regarding retained earnings and debt, the retained earnings did indeed climb to a point where we now are now at our target of 20% of gross sales.
The biggest risk we face right now is the Manitoba withdrawal, which is likely to happen by the end of the year. That's going to raise operating, governance, and logistical concerns because, as noted, it is 80% of our supply. The Government of Canada has conducted consultations to determine what the future of the corporation would be and it will share that with all of us once it has reached a final determination.
Last year, we told the Government of Canada that in light of what Manitoba was announcing, we would operate in a free market and we would maintain the value of the corporation's assets and resources. We would also secure a supply of fish so that we could utilize the processing capacity that exists in Winnipeg and meet our commitments to international markets while maintaining revenues. We're achieving that through entering into long-term contracts as we did in Saskatchewan, with Manitoba fish. The vast majority of those fishers in Manitoba have agreed to sign contracts with us. If you sign a contract with us as a Manitoba fisherman, we'll buy all your fish and we'll provide services like ice and totes. We will help with the administration of things like employment insurance. If you don't, then we will buy fish from people who don't sign contracts, provided that fish is profitable for the corporation.
In summary, the exam took place in a rather remarkable period.
One interesting question to the Auditor General would have been: have you ever done a special exam on a crown corporation when the corporation had removed its president and was in the process of dismissing with cause, and where those symptoms were caused by those situations? Is that something unique? I don't know the answer to that.
We've acted on the recommendations of the OAG for which we have authority and we're working with the Government of Canada. As noted, we still have vacancies. We have five board members out of nine. I definitely agree that the more people around the table, the better the quality of the decision. I hope that some of those vacancies will be filled quickly.
Recent performance indicates that things are back on track. That, by the way, is audited by the Office of the Auditor General. Last year's profits of $7.4 million, etc., that's audited. That's not us saying we're on track. It's evidence that that is the case.
Thank you very much.
9:40 a.m.
Liberal