By Tina Comeau
A long-awaited report into a forensic audit of SWSDA has finally been made public.
The audit, carried out by the firm Ernst and Young, refers to cheques made out to suppliers that were never passed on, ineffective controls over expenses, a lack of diversified skill sets on the SWSDA board, annual operating deficits and insufficient financial and project information to enable effective oversight both in the long-term and on a day-to-day basis.
(You can click here to read the report.)
In speaking with reporters about the audit, Percy Paris, the minister of Economic and Rural Development and Tourism, said the audit report will be shared with the RCMP.
“The report will now be provided to the RCMP, without judgment, to determine whether or not any laws have been broken,” said Paris, who said he personally has not received any legal opinion on this matter.
(Note to readers: You can read a related story, Former SWSDA CEO's lawyer responds to audit, by clicking here.)
The audit was released by the government on Friday, Aug. 3. The audit had been announced in October 2011 as a means of trying to determine what happened to the money the South West Shore Development Authority (SWSDA) was provided with and responsible for.
Asked if the audit answered the question of where the money went, Paris told reporters, “We know where the money went, we just don’t know where the final resting place for some of those dollars would be.”
As for the long list of creditors that are collectively owed around $2.3 million from SWSDA, this report does not bring them any closer to seeing their money. Asked if they ever will, Paris said, “We’ve been in touch with those that are owed money and we’ve told them that they should be consulting with lawyers.”
He said for the government to step in and pay the unpaid bills would create a slippery slope in future bankruptcy cases involving other companies. And if there was only a limited amount of money available, to pick and choose who should be paid would be playing favourites since all unpaid bills have resulted in some level of financial hardship for those involved, albeit at varying levels.
The forensic audit examined around 79 per cent ($37.1 million) of receipt transactions and 84 per cent ($39.5 million) of payment transactions related to the fiscal years 2005 to 2010, although the audit also went as far back as 2003.
Financial statements examined in the audit showed that SWSDA – which ceased operations in June 2010 – sustained yearly losses from 2003 to 2010 that totaled $806,792. The exception during that timeframe was a gain in 2008 of around $1.82 million because of the sale of the Shelburne Naval Base property to Seacoast Entertainment Arts Inc. Still, noted the audit, restrictions on the funds obtained from the 2008 sale of the Shelburne Youth Centre and the Shelburne Naval Base (also referred to as the sound stage) resulted in insufficient cash from the sale being available for use in operations.
The audit found cheques payable to suppliers that were issued but were held back and never sent. These cheques totaled $468,748.18. SWSDA, at the time, was said to be experiencing cash flow issues.
Other areas that Ernst and Young included as “key findings” in the forensic audit was that it was unable to locate approval for the salary of the former chief executive officer (CEO) Frank Anderson for most of the fiscal years under review. As well auditors were also unable to locate board approval for an individual pension plan.
The report noted that between April 11, 2002 and Aug. 5, 2009, the CEO received a total of $44,500, in the form of a monthly $500 travel allowance that was not declared by SWSDA in calculating the taxable income of the CEO for his T4 statement of remuneration paid for income tax purposes.
The audit documented $48,574.70 of meal receipts submitted for reimbursement by Anderson for meals for himself and others during fiscal years 2005 to 2010. The auditors found 180 instances, representing 157 days, in which per diem meal rates were claimed by the CEO on the same day receipts for meals were submitted for reimbursement.
“During an interview the CEO stated that when he took individuals out for a meal, while he might have a drink, he did not order food for himself as he would spend the time talking instead of eating,” reads the report. “Accordingly, he submitted the receipt relating to the meal or meals purchased for his guests and claimed the meal rate in respect of himself.”
The key findings also refer to what appeared to be a few instances of duplicate invoices for consulting work on a couple of SWSDA projects.
When it came to SWSDA projects listed in the audit report, in most cases the expenses outweighed the revenues.
During his media briefing following the release of the report, Paris was asked why previous governments didn’t act sooner on the SWSDA issue. He said he couldn’t speak to what previous governments did or didn’t do.
Asked what prompted him to seek the audit, Paris said people wanted to know where the SWSDA money went. The minister said he’s no mathematician but even he knows one and one equals two. So when a regional development authority like SWSDA was experiencing deficits year after year it begged the question, why?
“I think the report speaks for itself,” he said, “and I will let everyone arrive at their own conclusions.”
Meanwhile, he said, the government has taken steps to ensure accountability and transparency is paramount in the use of public funds.
“Since 2010 we have taken significant steps to strengthen the oversight and the governance of RDAs (regional development authorities) and we are committed to continuous improvements,” said Paris. “Our actions include putting in place the recommendations in the 2010 Ombudsman’s Report on SWSDA that relate to the province, including tighter accounting and audit controls, and incorporation of all RDAs under the RDA Act, which increases the oversight of operations and use of public funds by RDAs.”