Distributed governance in Canada: The changing nature of public sector governance

3 minute read

The IOG recently released an updated study on Distributed Governance Organizations (DGOs) in the Canadian public sector which demonstrates that such distributed organizational forms continue to account for a considerable portion of public sector expenditures and employment at all levels of government in Canada—an estimated 65% of government spending (federal, provincial and territorial) in 2010 and 66% in 2016-17.

“The role that these DGOs play across jurisdictions in Canada continues to change the nature of public administration,” says Samuel Wells, the study’s principal author. “It appears that the devolution and delegation of power and responsibilities away from core government is now not only a permanent feature of public sector governance, but the new study reveals with certainty that distributed governance is the predominant overall form of public administration in Canada.”

The original study, published in 2012, identified new trends in the design and machinery of government and the resulting changes that occurred to power concentration. In particular, it was noted that there had been a shift from the traditional ministerial design of the Westminster executive branch to the use of organizations that operated at “arm’s length” from their responsible minister—organizations we now refer to as DGOs. At the time of the original study, it was clear that Canada’s public service was moving away from “clear lines of accountability within vertically-integrated organizations” and towards an increasingly complex and interdependent system.

“The evolution of the public sector in this manner entailed a number of consequences, including less direct accountability to elected officials (i.e. ministers) and a greater capacity for the public service to operate independently,” says Karl Salgo, IOG’s Executive Director of Public Governance and a contributor to the 2019 study. Salgo notes that a particular increase in the use of DGOs at the provincial level suggests that distributed governance is increasingly relied upon for service delivery purposes relative to other functions, such as policy-making. “Regardless of function, however, the use of DGOs compels public administrators to take new approaches to matters such as oversight, policy alignment, and the management of risk,” he adds.

As the IOG has noted in the past, the reality that Salgo refers to carries certain risks that must be effectively managed. There is significant financial, operational, reputational, and policy exposure in organizations that have been less subject to traditional government control systems and have not undertaken new approaches to oversight and alignment.

“On the other hand,” says Wells, “government potentially undermines the purpose of DGOs when they subject these organizations to the same level of oversight as core ministries.”

“Hence,” adds Salgo, “a DGO must be managed in a manner that ensures that its operations line up with core government mandates while maintaining an appropriate degree of autonomy over its day-to-day functions, which will vary based on an organization’s roles and responsibilities.”

In the context of other work, including in his advisory practice, Salgo has observed a significant extension of traditional control systems to DGOs in recent years, as well as the increased use of mechanisms to improve policy alignment. These mechanisms include memoranda of understanding, directives, and statements of expectation between ministers and the DGOs for which they are accountable.

“The IOG will continue its work in this area,” says Salgo, “and in particular, we plan to explore the use of funding and accountability agreements with non-government transfer payment recipients as a means of public service delivery.”

DISTRIBUTED GOVERNANCE IN CANADA:KEY CONCEPTS

Distributed governance—the devolution of public sector responsibilities to organizations with day-to-day independence from core government—is:

• A predominant characteristic of contemporary public administration.
• Shown to account for the greatest portion of public sector spending in Canada. Most commonly used for service delivery functions with increasing use being made of partnerships with non-government entities.
• Raising distinctive issues for the public sector, notably with respect to the management of key risks—financial, operational, and reputational, as well as the risk of misalignment with overall government policy.
• Now a permanent feature of public sector governance.