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Title:				Guidelines for the Preparation of Corporate Plans*

Author/Information:		Program Branch
				Treasury Board of Canada Secretariat
				Telephone:  (613) 957-0156
				facsimile:  (613) 957-0160
				Internet address: Greg.Bradbury@tbs-cts.x400.gc.ca

Last Revision:			June 1994

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Alternative Formats:	This publication is available in alternative formats.

*© Minister of Supply and Services Canada 1996.  All rights reserved.  You may reproduce this publication in whole or in part provided you acknowledge the Treasury Board of Canada Secretariat, as source of all copies.  However, to obtain permission to reproduce a work in whole or in part for purposes of resale or redistribution, please contact the Secretariat.

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GUIDELINES FOR THE PREPARATION OF CORPORATE PLANS

I.	PURPOSE

	These guidelines are intended to assist management of Crown corporations, in conjunction with their boards of directors, in the development of their corporate plans.  The guidelines expand upon and clarify key corporate plan content requirements set out in the Financial Administration Act (FAA) and the Crown Corporation Corporate Plan, Budget and Summaries Regulations. 

	The guidelines are not intended to limit the inclusion of information judged to be relevant by a corporation, or to inhibit the style of its presentation to the appropriate Minister and to Cabinet.

II. 	GENERAL PRINCIPLES

1)	The corporate plan is the centrepiece of the accountability regime adopted by Parliament for Crown corporations.  This regime allows Crown corporations greater managerial autonomy than departments in order that they may pursue both commercial and public policy objectives efficiently and effectively with a minimum of government intervention.  To balance this greater autonomy, the regime requires Crown corporations to keep the government informed of activities, strategic issues, and plans, and to report regularly on how well the plans were achieved.

2)	As with business plans of private sector firms, the corporate plan should result from an in-depth analysis of the company and its environment by the corporation's senior management and its board of directors.  It should commit the corporation to a planned strategic direction over the planning period (e.g. its goals/objectives, strategies, etc.).

3)	The corporate plan should be based on and should present an assessment of the corporation's current strategic position including an analysis of the corporation's business and its operating environments.  The plan should clearly identify the key strategic issues the corporation will face over the planning period.  It should outline the planned actions for addressing them.  

4)	Corporate plans should establish a clear linkage among the strategic issues confronting the corporation, the corporation's objectives for the planning period, and the strategies developed for the achievement of these objectives.  They should also contain related performance measures with targets to serve as benchmarks for reviewing results in subsequent corporate plans.  

5)	Corporations should utilize the corporate plan as an early warning system to alert the government to future developments.  Anticipated major events and decisions likely to be required from the government over the planning period should be described and assessed.

III.	DEFINITIONS

	Definitions in these guidelines are the same as those in the Financial Administration Act and the Crown Corporation Corporate Plan, Budget and Summaries Regulations.

IV.	CONTENT OF CORPORATE PLANS

	Corporate plans should include:

1.	EXECUTIVE SUMMARY

	The executive summary should highlight the strategic issues requiring attention over the planning period, the corporation's major objectives, and planned strategies.  Anticipated major decisions facing the firm during the planning period should be reviewed, including for example key capital projects, new programs or activities, and financing plans.

2.	MANDATE

	This section outlining the corporation's mandate (including legislative provisions and related Cabinet decisions) should include a description of the corporation's public policy role. 

3.	CORPORATE PROFILE

	This short overview of the corporation's businesses and activities should describe for example the corporation's history, its principal programs or businesses, its organizational structure, its financial condition, etc, and should include summary statistics where appropriate.  Where relevant, these should be accompanied by an overview of the economic or policy sectors in which the corporation operates including descriptions of the important opportunities, threats and changes facing the corporation.  This section should also provide a brief summary of the competition faced in each major business segment, and of any other government assistance programs aimed at the same clientele (both federal and provincial).

4.	STRATEGIC ISSUES FOR THE PLANNING PERIOD

	The key strategic issues facing the corporation should be identified.  This identification should be based on assessments of:  recent actual performance, the anticipated external business environment, and the corporation's strengths and weaknesses. These issues, as identified by the corporation's management and its board of directors, should constitute the basis for formulation of the corporate strategy for the planning period.  The section should include:

	(A)	ASSESSMENT OF RESULTS

	The analysis of strategic issues should start with, and build upon, an assessment and an explanation, including quantitative information, of significant differences between recent actual (projected) results and planned performance.

	(B)	ANALYSIS OF THE EXTERNAL BUSINESS ENVIRONMENT

	The corporation's analysis of its external economic and business environment as projected over the planning period is an important element of the corporate plan.  This should focus on the main external determinants of success including such things as the level of competition faced by the corporation, markets, labour relations, inflation levels and interest rates.  This presentation should facilitate a clear understanding of the strategic issues related to the external operating environment (both threats and opportunities) of the corporation.

	(C)	ASSESSMENT OF CORPORATE RESOURCES

	The corporation's assessment of corporate strengths and weaknesses, based for example on actual performance relative to the previously established objectives and relative to the performance of competitors, should be presented.  This assessment often leads to the identification of strategic issues requiring corrective actions in the planning period.  These could for example include the need to improve labour productivity or profit margins, to divest non-core business operations, to improve the targeting of services, to improve management information systems, to better match the term structure of assets and liabilities, etc.

5.	OBJECTIVES, STRATEGIES, AND PERFORMANCE MEASURES

	This section constitutes the heart of the corporate plan and should clearly indicate corporate intentions over the next five years describing, for each major business segment, the objectives the corporation intends to achieve, how it proposes to do so (i.e. strategies), and the related performance benchmark measures for assessing progress.

	This description of the corporation's objectives, strategies and related performance targets, as approved by management and the board of directors for the planning period, should build upon the previous analysis of strategic issues.  It should include:

	(A)	IDENTIFICATION OF OBJECTIVES

	The corporation's objectives for each major business segment over the next five years should be clearly specified.  The objectives should be specific in nature and should flow from and be linked to the strategic issues identified for the planning period.  (They should not simply be restatements of the corporation's ongoing mandate.)  Objectives might include, for example, statements relating to assuring financial viability, improving the corporation's ability to compete, maintaining the corporation's asset base, etc.

	(B)	DESCRIPTION OF STRATEGIES

	The description of the chosen strategies should explain how their implementation will achieve the objectives.  Strategies might include, for example, actions aimed at containing or reducing costs, modernization or expansion involving new capital expenditures, initiatives aimed at increasing market share, measures to improve employee relations, etc.  The anticipated impact of each strategy on current corporate policies, businesses, activities or management or operating practices.  These should, to the extent possible, be quantified.

	(C)	ESTABLISHMENT OF PERFORMANCE MEASURES AND TARGETS

	Specific performance measures and targets, both operational and financial, should be established for the identified objectives.  Performance measures adopted might, for example, relate to productivity increases (%) or reductions in costs ($) relative to what would have happened in the absence of any change.  The plan should indicate why these targets are believed to be attainable.

	As with objectives, performance measures should relate to areas over which the corporation has some meaningful degree of control.  The performance measures adopted for the first year of the plan are of course of particular significance.  As a general rule of thumb, in order to facilitate accountability, the number of performance measures should normally not exceed one or two for each objective.

	It is recognized that the degree of uncertainty involved in formulating objectives, strategies and performance measures, as well as financial projections, increases in the latter years of the planning period.  These should nonetheless be reasonably distributed throughout the five-year planning period.

6.	FINANCIAL STATEMENTS

	The corporate plan should include financial statements covering the two years prior to the start of the planning period (actual results for the first year and projections for the current year) and pro forma statements for each of the next five years:

	(A)	INCOME STATEMENTS

	These should indicate major categories of revenues and expenses for each major business segment, and include statements on retained earnings.

	(B)	BALANCE SHEETS

	(C)	STATEMENT OF CHANGES IN FINANCIAL POSITION 

	These should reflect all cash flows, including all budgetary and non-budgetary transactions with the Consolidated Revenue Fund.  For appropriation-dependent corporations, statements should be provided for both the corporation's financial year and the government's financial year if these are different.

	The corporate plan should also contain an analysis of the financial statements including:

	-	A description of the detailed assumptions underlying the corporation's forecasts.

	-	For key assumptions, an analysis of the sensitivity of plan projections (e.g. profitability and cash flow) to changes in these assumptions.

	-	A description of planned major capital expenditures and their importance in relation to strategic issues and objectives identified for the planning period.

	-	Details of borrowing and investment plans (if any) and related strategies, including those relating to foreign exchange and interest rate risks.  Borrowing plans should set-out aggregate borrowings, principal repayments and total amounts outstanding for borrowings with terms greater than one year.  For borrowings with terms to maturity of one year or less, the maximum and total amounts outstanding should be stated.  Details on the matching of borrowing terms and the useful life of assets should also be included.

	(D)	NUMBER OF EMPLOYEES

	The corporate plan should also set out the number of employees at the end of the financial year immediately preceding the current year, and as projected for the current year and over the planning period.  The reporting basis for these data (e.g., person-years, full-time equivalents or full-time employees) should be clearly stated.

7.	SPECIFIC APPROVALS, NOTIFICATION OF
	RESTRICTED TRANSACTIONS AND LAND-USE PLAN

	Corporations should generally seek Cabinet approval of their capital budgets (and operating budgets for Part I, Schedule III corporations) as part of their corporate plan submission (content requirements for these are outlined in Annex I).  They may also wish to take advantage of the corporate plan approval process to seek other Treasury Board or Governor-in-Council approvals such as approval of restricted transactions.  Requested approvals should be clearly identified as such.

	The corporate plan submission (or subsequent amendment thereto) should also be used as the means to notify the appropriate minister and the President of the Treasury Board of restricted transactions undertaken by the corporation since the last corporate plan submission.

	Where the corporation is an agent of the Crown and has real property, it should disclose its plans for any significant disposals or acquisitions, including leases.

8.	SUPPORT FOR GOVERNMENT POLICIES

	The corporate plan can also serve as an appropriate vehicle for reporting to the government on implementation of various policies (e.g. wage restraint).

9.	TITLE PAGE REQUIREMENTS

	To facilitate the timely processing of corporate plans, capital and operating budgets, or amendments thereto, by appropriate ministers' departments and offices and by Treasury Board Secretariat, the title page of each corporate plan, capital and operating budget or amendment thereto, should include:

	-	the name of the parent Crown corporation
	-	the title of the document
	-	the planning period (for corporate plans) or budget year (for budgets) covered by the document.

	Example:

	Corporate Plan for the 1994 to 1998 Planning Period
	Capital Budget for the 1994 Budget Year
	Operating Budget for the 1994 Budget Year
	Amended Corporate Plan for the 1994 to 1998 Planning Period

V.	CONFIDENTIALITY

	Corporate plans are highly confidential in nature. They contain highly sensitive and often commercially-confidential information.  As submissions to Cabinet and as confidences of the Privy Council, corporate plans are treated in a manner comparable to Memoranda to Cabinet and are subject to the same strict protective measures.  Corporations are advised to assist in maintaining this security by adopting their own security measures such as restricting and numbering the copies of their plan.

	The corporate plan should be distinguished from the corporate plan summary which is tabled in Parliament.  Sensitive material contained in plans (e.g. commercially detrimental information referred to in Section 153(1) of the FAA) should of course not be incorporated in the corporate plan summaries since these become public documents.

VI.	FURTHER INFORMATION

	The business literature on the preparation and use of corporate plans is extensive and may vary in terms of concepts and definitions.  A brief bibliography which corporations might find helpful in this regard is attached.

	Corporations are invited to raise any questions or comments they may have on the guidelines with their analyst or with the Policy and Corporate Information Division of the Crown Corporations and Privatization Sector at (613) 957-0120.

BIBLIOGRAPHY

Allio, Robert J. and Pennington, Malcolm W. (editors) in cooperation with the North American Society for Corporate Planning, Corporate Planning Techniques and Applications, New York:  AMACOM ‑  a division of American Management Associations, 1979.

Ansoff, H. Igor, Implementing Strategic Management (see Chapter 5.3 ‑ Strategic Issue Management), USA:  Prentice Hall International Inc., 1984.

Focus on Strategy ‑ A Guide for Evaluating Corporate Strategies and Business Plans, Toronto:  Woods Gordon/Arthur Young International.

Laventhol and Horwath, How to Write a Business Plan, American Management Association, Third Edition, 1990.

Moskow, Michael H., Strategic Planning in Business and Government, New York:  Committee for Economic Development, Fourth Printing, 1981.

Nakahara, Toshio and Isono, Yutaha, "Strategic Planning for Canon; the Crisis and the New Vision," Long Range Planning, Vol. 25, No. 1, pp. 63 to 72, Great Britain:  Pargamon Press, 1992.

ANNEX I

GUIDELINES ON THE CONTENT OF OPERATING AND CAPITAL BUDGETS

I	OPERATING BUDGETS

	Operating budgets should include:

	1.	Assessment of Past Results

	Significant differences in operating results between recent (actual) results and planned budget performance should be explained.  Similarly, important variances in operating results currently projected for the current year and past forecasts should be reviewed.

	2.	Presentation of Budget Year Data

	Major assumptions used in preparing budget projections for the budget year, and the sensitivity of budget projections to changes in these assumptions should be explained.  The operating budget should also provide an overview of significant operating expense commitments or expectations for the budget year.

	Differences between budget year projections and projections for the current year should also be reviewed.

	3.	Overview of Operating Results

	Operating results, by major category of revenue and operating expense, should be presented for the recent actual, current and budget year (3 years in all).

	Amended operating budgets should include:

	-	a statement of the strategy underlying the amendment

	-	an explanation of any variances between the results projected in the originally‑approved operating budget for the budget year and the results projected in the proposed amendment

	-	a description of the major assumptions used in preparing the amendment and the sensitivity of amended budget projections to changes in these assumptions

	-	revised financial statements including:  statement of income and retained earnings, statement of changes in financial position, and a balance sheet

	-	an overview, by major categories of revenue and operating expenses, of actual or projected operating results and the budget year projections.

II	CAPITAL BUDGETS

	Capital budgets should include:

	1.	Presentation of Budget Year Data

	The capital budget should describe the corporation's capital expenditures for the budget year.  This should include details on prior year, budget year and future year expenditures.

	The capital budget should also identify capital expenditure commitments by major project (including information on cash flows and loans, investments and subsidies).  In cases where projects are to be funded by appropriations, details on the sources of capital funds for each project should be provided.  A description of the major assumptions used in preparing the budget, for each major project, and the sensitivity of budget projections to changes in these assumptions should also be provided.

	2.	REVIEW OF CONTEXT FOR CAPITAL EXPENDITURES

	The capital budget should present a brief overview of the criteria used for selecting significant capital investment and the anticipated impact of these investments on financial performance and the objectives set out in the corporate plan submitted for the same (current) year.

	Where a capital expenditure in the budget year can be related to a similar expenditure in the current year, an explanation of the differences between these should be provided.  The capital budget should also report on recent (actual) capital expenditures and commitments, current projections and projected results for the budget year.

	Lastly, the capital budget should briefly review variances between recent (actual) capital expenditures and commitments and those projected for that year in the capital budget approved for that year, as well as the variance between projected capital expenditures and commitments projected for the current year and those foreseen in the capital budget approved for that year.

	Amended capital budgets should include:

	-	a description of the proposed amendment:

		including details on amendments to capital expenditures made in previous years, and projections for the budget year and commitments for future years approved in the last capital budget

		including details on amendments to commitments to make capital expenditures by major project, including any amendments to cash flows, loans, investments and subsidies approved in the last capital budget.

	-	an explanation of any variances between the results projected in the originally‑approved capital budget for the budget year and the results projected in the proposed amendment.

	-	an outline of the criteria employed for significant capital investment not included in the previously‑approved capital budget, and the anticipated impact of the investment on financial performance and on objectives set out in the corporate plan submitted for the same (current) year.

	-	a description, for each major project, of the major assumptions used in preparing the amendment and the sensitivity of amended budget projections to changes in these assumptions.

	-	revised financial statements including:  statement of income and retained earnings, statement of changes in financial position, and a balance sheet.

	-	an overview of amended capital expenditures and commitments in the budget year to projections, or actual (if available), capital expenditures and commitments in the current year.