NCC faces deteriorating assets and lack of funding, audit finds

The National Capital Commission (NCC) is falling behind on keeping its properties in good condition and didn't properly inform the government about the steps it has taken to address a funding shortfall, according to the findings of a recent audit.

The NCC deemed about 27 per cent of its assets to be in fair, poor, or critical condition in 2016, according to a special examination released Thursday by the federal auditor general's office.

Those assets include 24 Sussex Drive and other heritage buildings including O'Brien House in Gatineau Park and the Ottawa New Edinburgh Club, as well as bridges, parkways and shorelines — many of which generate revenue.

The Portage Bridge needs resurfacing (a public consultation is expected in the fall), NCC communications director Nicholas Galletti said in an interview by phone Thursday. While the Hog's Back Bridge is in fair condition, the NCC said it needs rehabilitation, with many of its components having reached the end of their life cycle.

About 75 per cent of all NCC roads and parkways haven't seen any major work since the 1980s.

But due to a lack of funding, priority fixes were identified and non-priority work was delayed, according to the audit, which covered the period from February to December 2016. An NCC analysis also showed that the Crown corporation might not be able to maintain and preserve all its assets at acceptable levels.

"This significant deficiency matters because if the corporation's assets continue to deteriorate, it might not meet its mandate, and the assets could cause health and safety issues," the audit reads.

Problem not a new one

The last NCC audit in 2007 found that the NCC's restoration projects "were not always completed within the planned time frames, partly because of a lack of funding."

Their capital budget is about $22.7 million per year.

That problem only continued in the intervening years and the NCC took steps to address the funding shortfall, according to the 2016 audit. Those steps included:

• Delaying maintenance on some assets to get high-priority work completed.
• Sharing costs with other levels of government.
• Launching a snowshoeing program in Gatineau Park.
• Automating systems, including parking fee collection. 

But in its five-year plans, the NCC didn't properly inform the government about those strategies. And what's more, the strategies "have not yet had a significant financial impact," the audit reads.

"The corporate plan is a key vehicle for the corporation to inform the government every year on its activities, strategic issues, and key risks. These weaknesses matter because the government did not receive clear and complete information about this key risk and mitigation strategy in the corporate plan for decision-making."

By December 2016, NCC management was finalizing a detailed asset-by-asset analysis to quantify the resources required to restore deteriorating assets and identify the annual level of resources needed to maintain and preserve all its assets.

A third-party has been hired to review and analyze the NCC's cost estimates. No figures were provided Thursday.

"What I can say is the replacement value of all our assets is over $1.7 billion, and with $22.7 million in capital a year, I think we're doing quite well in terms of continuing to ensure that these assets are maintained. But we're coming to a critical stage where we're going to need extra funding," Galletti said.

Recommendations

The audit made two recommendations:

1. That the NCC should have a comprehensive enterprise risk management framework that sets risk tolerances, assesses strategic and operational risks through a consistent and integrated process, and provides comprehensive risk information for decision-making.

The NCC wrote that it agrees with the recommendation, and that the framework will be completed by March 31, 2018.

2. That the NCC should develop a full range of options to address its strategic risk related to asset maintenance, based on a complete analysis of the resources needed to restore and maintain its assets. The NCC should also work with appropriate government bodies to address the risk.

The NCC wrote that it agrees, and that it "will finalize its analysis of the level of resources necessary to restore and maintain its assets, develop a range of options to address those needs, and take steps to request the necessary approvals by June 30, 2017.

"The corporation has been actively working with other government entities to secure additional government
funding to allow the corporation to restore and maintain its assets. Since the 2009–10 fiscal year, the corporation has not received any increases in funding other than for specific purposes, mostly of a temporary nature," the NCC continued.

"To reduce the impact of the financial pressures, the corporation implemented strategies to generate revenues and contain costs, and identified opportunities for partnerships and collaborations. This was in addition to ongoing efforts to catalogue and understand the nature and extent of deferred maintenance. These efforts culminated in identifying this risk in the 2017–2018 to 2021–2022 corporate plan approved by the board in January 2017 and submitted to the government for its approval."

Read the full audit here.

Read the NCC's reponse here.