Financial issues continue in AER, environment ministry: auditor general

Financial reporting problems, improper expenses and mismanagement issues at the Alberta Energy Regulator extended beyond a problematic pet project of the regulator’s former CEO, the auditor general says.

Alberta’s Auditor General Doug Wylie (right) released his Report of the Auditor General-November 2019 for tabling in the Legislative Assembly on Thursday, November 21, 2019. Larry Wong / POSTMEDIA NETWORK

Financial reporting problems, improper expenses and mismanagement issues at the Alberta Energy Regulator extended beyond a problematic pet project of the regulator’s former CEO, the auditor general says.
In a new report tabled in the legislature Thursday, Alberta’s auditor general, Doug Wylie, said the AER’s former CEO awarded two $21,000 cash bonuses to other senior executives after new provincial rules took effect that forbid such perks.
The auditor could also not find formal approval of an arrangement that allowed former CEO Jim Ellis to claim travel expenses between his home in B.C. and the Calgary office. The AER reimbursed Ellis $20,000 for those expenses in 2018 before Ellis left the regulator.
The agency also gave up $1.3 million covering employees’ tax costs for parking benefits — even though a government employee told senior executives the tax rules in 2014, the auditor found.

“Generally, I’d describe it as very concerning,” Wylie said of the irregularities he found at AER. “I’d also describe it as atypical of what we see in the operations of agencies and boards in Alberta.”

This latest auditor’s report comes in addition to a separate batch of October reports in which the auditor, the ethics commissioner and the public interest commissioner joined forces to detail “gross mismanagement” at AER in its relationship to a non-profit corporation called the International Centre of Regulatory Excellence (ICORE).

Improper accounting of ICORE

The creation of the non-profit ICORE was catalyzed by Ellis, who wanted to share Alberta’s expertise in oil and gas regulation with other energy-producing countries.
The October reports said Ellis had set up the organization as a career exit plan for after he left the AER.
The auditor’s October report found at least $2.3 million of AER money was spent by ICORE and never recovered. About 50 AER employees who were employed by AER were found to have done work for ICORE.
The October reports also found text message evidence senior AER executives were taking steps to cover up expense claims related to ICORE.
For the 2018-19 fiscal year, the AER tried to claim ICORE operated as a separate, non-profit entity. On Thursday, the auditor general said he rejected that claim, prompting him to give the AER a “qualified audit opinion” on their finances, signalling he disagrees with their accounting. Adding that caveat is “very rare,” Wylie said Thursday.
ICORE’s financial results should have been consolidated with AER’s, Wylie said.
The auditor made three new recommendations to AER: to improve processes for expense claims, long-distance work arrangement and succession planning and to ensure it’s following public compensation laws and tax rules.
In September, the United Conservative Party government fired and replaced the AER board and ordered a review of the organization.

$25 million unpaid royalties

A follow-up audit included in Wylie’s annual report also finds that Alberta Environment and Parks is not sufficiently protecting the province against financial and environmental risks of un-reclaimed sand and gravel pits.
$25 million in royalties is owed to government by oilsands operators due to exemptions given by the department without proper authority, the report found.
“Ten years after our original audit, the processes for reclamation monitoring and enforcement are still inadequate, and so is reclamation security,” Wylie said, noting that the department does not properly collect security or royalties from pit operators.
This leaves Albertans to shoulder a shortfall if operators do not pay, Wylie said. The government has no concrete plan to recoup that money, he said.

Progress to be made

In three other follow-up reports ranging from funding for First Nations to health costs, Wylie found that the province has been able to effectively implement his previous recommendations, but that some progress has yet to be made.
The province is now collecting $28 million more per year from insurance companies to help cover health-care costs for people injured in car crashes. The government gave up about $140 million over five years by underestimating the cost of treating collision injuries, the auditor said.
In terms of Service Alberta’s IT capacity in the event of a disaster, Wylie found that while progress had been made since a 2014 recommendation, more work is needed to ensure these services can be back up and running as soon as possible.
The report includes one new and two repeated recommendations to Environment and Parks and one repeated suggestion to Service Alberta to improve fiscal responsibility and efficiency across these ministries.