Capital Asset Management Framework: 2. Governance & Oversight
Last updated on January 4, 20212.1 Overview
In these guidelines, governance refers broadly to the legislation, policy, procedures and systems that guide the management of capital assets through their full life cycles. Governance concepts can be applied at both the agency and central government levels.
Oversight refers to the relationship between agencies and central government, encompassing the range of checks and balances applied throughout the capital management process.
These could include Treasury Board’s assessments of individual projects, or of agencies’ overall capital plans, at key points in the capital asset management process. Specific oversight conditions are set out as part of the broader direction in Treasury Board
Decision Letters or in Mandate Letters.
The following section:
- lists and describes relevant legislation
- provides a general overview of the roles and responsibilities of public-sector agencies in capital asset management, and
- provides information on the Province’s approach to oversight for capital asset management
For additional information on oversight, see Section 5.3 Treasury Board Approval Requirements (Oversight).
2.2 Legislation
Capital asset management in B.C. is governed by a range of statutes, including the:
Financial Administration Act (FAA)
The FAA establishes government’s responsibility and accountability for managing public money across all program and service areas. It is the principal authority for capital financial management and administration.
Sections 4.1 and 6 of the FAA authorizes Treasury Board and the Minister of Finance to provide central direction on capital management to government and government bodies, including Crown corporations and the broader public sector.
The following points reflect key elements of the FAA that apply to capital asset management:
- Treasury Board may provide direction and establish policy and conditions for capital expenditure planning, management and reporting
- The Minister of Finance has responsibility for fiscal policy, the fiscal framework (including revenue, expenses and debt), management and administration of the consolidated revenue fund and other financial matters, and
- Ministers are responsible for proper financial administration of their respective ministries, under the general direction of the Minister of Finance and Treasury Board
Financial Information Act (FIA)
The FIA sets out the authority of the Minister of Finance, or the minister responsible, to obtain financial information–, including capital related information as set out in the FAA, from a corporation. The FIA also grants authority to the Minister of Finance to audit crown corporations.
Balanced Budget and Ministerial Accountability Act (BBMAA)
The BBMAA prohibits annual budget deficits as of fiscal 2004-05. It also establishes a salary holdback for ministers and the Premier, paid out on the achievement of annual expenditure and performance targets.
Budget Transparency and Accountability Act (BTAA)
The BTAA requires public agencies to produce annual service plans as part of a provincial accountability framework. It also requires agencies to publish financial and other information on major capital projects with provincial contributions over $50 million.
Other Legislation
Crown corporations and local agencies are also subject to a variety of agency-specific legislation that affects capital management.
2.2.1. Legislation Tools
View the Revised Statutes and Consolidated Regulations of British Columbia
2.3 Roles & Responsibilities
Clearly established roles and responsibilities support strong accountability, which is one of the key principles of the Capital Asset Management Framework. This section provides a general overview of public-sector capital asset management roles and responsibilities. The information is not comprehensive and is mainly intended to illustrate the areas in which responsibilities diverge and overlap.
The Ministry of Finance provides support and advice to Treasury Board and the Minister of Finance on all matters relating to capital expenditures.
All other provincial ministries are responsible for setting standards for their programs, identifying and prioritizing capital needs within their sectors, and
preparing capital plans consistent with their service plans. Some ministries are also responsible for directly managing and monitoring capital projects.
Local agencies such as school districts, health authorities and post-secondary institutions are responsible for delivering programs consistent with their mandates and their ministries’ strategic directions.
Crown corporations are responsible for planning and implementing capital plans and projects and maintaining their
capital assets, consistent with their mandates and strategic objectives.
The following table (Figure 2.3) summarizes some of the key roles and responsibilities of each level of government in capital asset management.
Figure 2.3
| Key Capital-Related Roles and Responsibilities | Levels of Government | |||
|---|---|---|---|---|
| Ministry of Finance | Provincial Ministries | Local Agencies | Crown Corporations | |
| Financial Framework & Policy | ||||
| Establish/administer government’s central financial framework and policy | ||||
| Borrow funds on capital markets, guarantee agency debt and advance funds to agencies | ||||
| Prepare and report provincial financial statements | ||||
| Develop, implement and maintain a capital-related financial framework, relevant to the agency (or government as a whole in the case of the Ministry of Finance), addressing such issues as debt service, debt and risk management | ||||
| Develop and implement internal policies, standards and procedures consistent with the Capital Asset Management Framework | ||||
| Program & Planning | ||||
| Establish ministry and program-level standards, policies and procedures; communicate these to local agencies, along with program requirements and ministry strategic priorities | ||||
| Identify and assess capital needs at the program or agency level | ||||
| Prepare Capital Asset Management Plans | ||||
| Review capital-related submissions and prepare the provincial Consolidated Capital Plan | ||||
| Capital management & Implementation | ||||
| Implement capital plans | ||||
| Manage capital projects/programs, public-private partnerships or other activities necessary to meet service delivery or capital needs | ||||
| Own, maintain and operate facilities | ||||
| Monitor/audit compliance with government requirements (e.g. Treasury Board conditions of approval) | ||||
| Monitor ministry's capital program and approved capital projects | ||||
| Publicly communicate capital-related approvals and/or key milestones in the life cycle of capital projects | ||||
*yellow shaded areas = may be relevant to only certain ministries
2.4 Provincial Oversight
Oversight refers to the process by which central government reviews, approves, monitors and provides guidance on the capital-related work of public agencies. Oversight occurs at both the agency and project levels, including the specific approval and reporting requirements set by Treasury Board.
The Province’s approach to oversight is risk-based. That means the level of checks and balances established by central government is proportional to the level of risk associated with an agency and/or specific capital project.
Within this system, agencies are subject to less oversight when they:
- have approved service and capital plans
- manage within fiscal and performance targets, and
- have a proven track record for managing capital projects effectively
Agencies that cannot demonstrate satisfactory performance are subject to more rigorous levels of oversight, as are complex, high risk projects, regardless of the agency’s track record.
Oversight is dynamic, and the Province operates on a principle of earned independence. In other words, agencies are subject to diminishing levels of oversight as standards are achieved, best practices are implemented and cost-effective, accountable performance is proven.
The Province’s objective is that all provincial public-sector agencies will be proven capital management performers and therefore subject to minimal oversight. To help agencies meet this objective, figure 2.4.1 illustrates the range of factors Treasury Board may consider in determining levels of oversight for agencies managing capital assets and projects.
Agencies are encouraged to address these factors as part of their commitment to best management practices.
2.4.1 Critical Central Oversight Factors
This section outlines the factors Treasury Board considers in determining levels of oversight for agencies managing capital assets and projects. For project-specific oversight considerations, see Section 3.2.
Figure 2.4.1
| Factors | Description |
|---|---|
| Organizational | |
| Service Plan | Consistent with BTAA requirements, every agency must have a service plan (or strategic or business plan) that has been approved by an appropriate authority (e.g. Cabinet, Treasury Board and/or Crown Board). The service plan must be aligned with government’s strategic plan and priorities. |
| Capital Strategy and Plan | A well-developed capital plan should explicitly support the agency’s service plan and, at a minimum, meet the standards set out in these guidelines (see Section 4 for further information). |
| Risk Management Plan | A comprehensive (i.e. enterprise) risk management plan or framework should be developed, consistent with these guidelines (see Section 3.1 for further information). |
| Performance Measurement and Reporting | Performance measures, targets and reporting mechanisms, linked to strategic and financial objectives, are integral to the agency’s service plan and capital plan. These should support agencies to identify emerging issues, adapt strategies and reallocate budgets as required. |
| Governance | Formal governance processes establishing decision-making authorities and accountabilities should be evident to central agencies and clearly communicated throughout the organization. |
| Process | |
| Expenditure Justification | Proven business case methodologies should be used to support all capital asset decisions. |
| Risk Management | Best practice risk management processes and standards should be in place to identify, mitigate and manage risks associated with all capital projects. |
| Project Management | Generally accepted best practices project management standards and processes should be in place and applied to managing specific projects. |
| Capital Inventory | An inventory management system should be in place to track the age, condition, and other attributes (e.g. utilization) of an agency's capital assets (see Section 4.3.2 for further information). |
| Asset and Real Estate Management | Procedures should be in place to manage a portfolio of assets with standards and performance measures to identify, prioritize and justify maintenance, expansion and other capital activities. |
| Planning and budgeting Tools | A well-developed system of planning and budgeting tools should be in place to support the development of meaningful capital plans, projects and budgets. |
| Operating, Maintenance and Administration Links | The agency’s capital plan should identify the costs and risks associated with capital assets through their full life cycles, including operating, maintenance and administration implications. These should be integrated directly with the agency’s capital decision process. |
| Public Consultation | The agency should consult with the public when appropriate to seek input to, and gain support for, its capital program. |
| Track Record | |
| Performance Achievement | The agency’s performance record for capital asset management, including its success in meeting capital-related fiscal targets, will be considered. |
| Project and Risk Management Performance | The agency's track record in managing projects and their risks will be carefully assessed. |
| Shareholder or Taxpayer Value | The agency should demonstrate that it has consistently sought to optimize value for money and, where appropriate, to coordinate its capital activities with other agencies to develop least overall cost solutions |
The chart above may be useful for ministries and Crown corporations assessing the capital-related capabilities of local agencies, subsidiaries or business units in their purview. Just as Treasury Board uses these factors to determine levels of agency oversight, ministries and Crowns can use them to help determine appropriate levels of oversight for capital projects.
Agencies can also use the chart above to assess their own organizations, and to address areas where improvements may be needed. Agencies should reassess their capital capabilities at least every three years and each time a significant organizational or management change is made.
To support this ongoing work, agencies are encouraged to appoint a senior manager with responsibility, accountability and authority for overseeing capital management processes, including education of agency employees and contractors.
2.4.2 Communication of Oversight Requirements
As detailed in Section 5.3 Treasury Board oversight conditions for agencies and projects are communicated as part of the broader direction in Treasury Board Budget or Decision Letters, Mandate Letters or Treasury Board Directives.
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