OTTAWA - Canada's passport agency "remains vulnerable to crises" like the near-crippling surge in demand for travel documents that left frustrated applicants waiting in long lineups a few years ago, an internal evaluation warns.

Passport Canada will continue to face periodic calamities due to unexpected events unless the federal government revamps its funding and overall organization, says the sober analysis obtained by The Canadian Press.

Security concerns prompted the United States to announce in April 2005 that people arriving by air would have to present a valid passport or other acceptable travel document as of January 2007.

The plan, known as the Western Hemisphere Travel Initiative, created a flurry of 4.8 million Canadian passport applications in 2007-08, a 32 per cent increase over the previous year.

The evaluation found the dramatic wave struck an ill-prepared agency hindered by poor planning, management, communication and reporting practices.

"The prevailing atmosphere among senior managers was characterized as one of tension, conflict and animosity," says the report. "A culture of risk aversion and lack of innovation was common practice, along with a tendency to disguise unfavourable performance indicators.

"In part, the lack of preparedness was owing to systemic reasons linked to the agency's status and funding arrangement."

A copy of the May 2009 evaluation prepared by the inspector general of Foreign Affairs -- the agency's parent department -- was released under the Access to Information Act.

The review says Passport Canada was at the mercy of other federal agencies for a helping hand because, as a special operating agency, it must have a balanced budget every year. That leaves it with no financial cushion to respond to emergencies.

As the crisis hit, the agency was saddled with an "inefficient, labour-intensive processing system" and outdated technology, the review says. The inability to keep up with demand resulted in a "mountainous backlog of unopened applications, which had a ripple effect throughout the agency."

A special federal appropriation of $55 million, the accelerated hiring of 1,500 new employees, creative thinking, teamwork, and streamlined application and approval policies helped the agency turn things around.

"Despite these positive changes, the risk for (Passport Canada) is to lose momentum and revert to old practices and behaviours," the evaluation says. "It is difficult to achieve lasting change in organizations, especially once the urgency and solidarity engendered by a crisis have come and gone."

The report calls for several changes including "a strengthened authority for Passport Canada and a new funding model."

It also urges regular post-mortems of difficulties, creation of a high-level crisis management team, development of contingency plans and a stronger learning culture.

A response from Passport Canada indicates many of the recommendations have either been implemented or soon will be. However, the central issue of a new funding arrangement has yet to be resolved.

The fate of proposals that would give the agency more financial flexibility depend on the outcome of public consultations it's conducting to help prepare for introduction of a new generation of passports.

The new generation of passports will be valid for 10 years, up from the current five, and will have an electronic chip containing the holder's information for added security.

The consultations through roundtables and questionnaires include "exploring the possibility of increasing passport fees," says the Passport Canada response to the evaluation.

Veronique Robitaille, a spokeswoman for the agency, said a new fee proposal will be made next spring before being tabled in Parliament. It's too early to say passport fees will go up, she added.

"It's premature to determine that, because we're still analyzing the feedback."