Dec 9, 2013

You always learn something when accountants feud


Every year in BC people who follow government get an early Christmas present in late November,  For the better part of a week BC’s Auditor General sits down with the legislature’s Public Accounts Committee (PAC) to talk about the Auditor General’s reports.

This year’s encounter was quieter than some in the past.  Former Auditor General John Doyle was feisty in his analysis of the BC government’s finances.  At times his exchanges with the accountants who worked for the government got heated.  However, the government got around this problem by not reappointing him as AG and he returned to Australia.

Russ Jones, a long-time staffer in the Auditor General’s office, is now the acting AG.  His exchanges at the PAC were quieter but lots of interesting points still came out.  As with previous years, much of the discussion centred on the government’s privatization initiatives – public private partnerships (P3s) and alternative service delivery agreements (ASDs) like the multi-year, multimillion dollar agreement with Maximus BC, a subsidiary of an American company, to manage our health care information.

The Committee spent the better part of a day discussing the AG’s February 2013 report on whether or not the Maximus contract was delivering the benefits it promised. In March of this year, two months before the provincial election, the government extended the Maximus contract for another five years without looking at other bidders.  AG Jones told the Committee the contract had not delivered all the benefits promised.  He went further saying, “I’d also like to point out that while the report deals specifically with the Maximus contract, we identified a number of challenges, as we do in many of our audits, that are likely common to other arrangements.”

Among other things, it turned out that the government lacked baseline information to let it compare Maximus’s work with what had gone before.  While in some cases monitoring had occurred, a Director in the AG’s office told the Committee Maximus had not been held accountable for its achievements consistently.  A spokesman for the government’s Business Management Office acknowledged there was a problem in monitoring the work of the subcontractors who worked for Maximus.

The Auditor General also had problems with the monitoring of promised results from the Sea-to-Sky Highway public private partnership.  Most of the results were being self reported by the company managing the highway.  The “availability payment” to the company is based on measurement of travel time and the automated system that was supposed to deliver the information “hasn’t to date functioned as intended.”

Not that getting information on these projects has been easy at the best of times.  AG Jones told the Committee that particularly in the case of the Canada Line P3 there were “some major disagreements with the auditee over information that was being given around ridership and whatnot.”  Even on the currently under construction Evergreen Transit Line the AG’s office found the government and its agencies “unable to locate” documents used to justify the process. In the case of the assessment done to justify extending the Maximus contract, a government spokesman told the Committee it had been prepared for Cabinet and as such was a Cabinet secret.

The cost for P3s, ASD’s and other government contracts is adding up.  In a few years it has gone from future payments of $30 billion to nearly $100 billion.  This is over and above the cost of government debt for borrowed money.  The AG told the Public Accounts Committee the numbers for these non debt obligations were getting very large and that it narrowed the room for future projects unless more revenue could be raised.  Because of this Jones told the Committee he had met with the Minister of Finance and was planning work “on fiscal sustainability and intergenerational equity in the province.”  Intergenerational equity questions involve the fact enormous future burdens are being offloaded on future generations.

BC is one of the few provinces that have a “qualified” opinion on its books from its Auditor General.  As one AG official explained, “the Auditor’s opinion provides the readers some assurance that the financial statements are fairly presented in accordance with the standards that are promulgated by, in this case, the Public Sector Accounting Board.”  In BC’s case on several issues the government’s reporting does not comply with required accounting standards.  For accountants, a “qualified” audit opinion is a really big deal.

One of those issues is the debt for the Port Mann Bridge.  The government says it should not show up as government debt because the bridge has a toll and will pay for itself.  Not so fast, says the AG, who pointed out that tolls have only been in place for a year and the evidence isn’t in yet on whether or not they will cover costs.

You might not think dueling accountants are interesting but when they are arguing about how well the government is spending our money it is worth buying the popcorn and taking a seat.

Topics: , ,