No public accountability for N.W.T. government's secret settlements

The Northwest Territories government says it cannot say how much it spends annually to quietly settle damage claims against it for things such as wrongful dismissal and disputes over contracting.

Every year the government spends tax dollars through confidential financial settlements to resolve mistakes it has made. There is no public accountability for that spending. The public never even finds out a mistake has been made.

Only rarely does the public get a glimpse into these settlements.

Almost 20 years ago, the Auditor General of Canada provided insight into one of these confidential agreements. The Legislative Assembly requested a review of a severance agreement then Premier Stephen Kafkwi signed off on for his chief of staff and longtime political aide Lynda Sorensen after she resigned in the wake of a political scandal. The Auditor General found that the government had paid Sorensen $250,000 more than she should have received.

Though many would question the appropriateness of a public government agreeing to keep any kind of payout of tax dollars confidential, settling disputes before they reach court, or even after they reach court, is often preferable to a long and expensive court battle.

"The fact that governments can be involved in some of those [out of court settlements] is not totally surprising," said Todd MacKay, a director with the Canadian Taxpayers Federation. "But it is something they have to be careful about because, of course, they're dealing with taxpayers' money."

MacKay said there is a problem when there is no accountability for financial settlements with private parties.

"If you create a system where as soon as the government settles something out of court there's no longer any need or possibility of a light being shone on that, then of course there's always a chance that somebody bad is going to find a way to waste a bunch of money," said MacKay.

"Lots of bureaucrats are going to manage that well, they're going to do their best not to waste money, but you're creating an opening, you're creating a temptation for the person who has questionable ethics."

No tracking of settlements

According to a Finance Department official, damage claims against the government are dealt with by the departments of Justice and Finance. CBC filed requests under the Access to Information and Protection of Privacy Act asking both departments for the total amounts spent on settlement agreements for each of the last 10 years.

Both departments said they could not provide that information because the filing system they use does not allow them to sort out files related to financial settlements. The Justice Department was unable to even say whether it settles 10, 100 or 1,000 claims each year.

CBC made several requests for interviews with Finance Minister Caroline Wawzonek and Justice Minister R.J. Simpson in the hope they could provide some insight into why information about settlement agreements is not available, and how they can be sure that confidential settlements are not being used to paper over government mistakes with tax dollars. Neither Wawzonek nor Simpson were available for an interview.

CBC has asked the Information and Privacy Commissioner to review departmental responses to its information requests.

Beyond insurance

The confidential financial settlements are paid out each year despite the government spending more than $2 million annually to protect it from various kinds of liability.

According to the Finance Department, the government carries policies for general liability, pollution liability, medical malpractice, professional liability for its Taiga Environmental Laboratory, liability related to its barge resupply operations, and liability related to its airports.

But insurance often does not cover all damages, for example those related to human resources issues.

During review of the current territorial budget, former Infrastructure minister Katrina Nokleby questioned the current minister, Diane Archie, about whether payouts to former deputy ministers would be included in a budget line that listed the total salaries and benefits for the department. Archie said they would.

Nokleby, who was minister at the time a deputy minister left the department, noted the department was anticipating spending a half million dollars more on wages and benefits for that year than it had originally budgeted. But when the government announced the deputy minister had left, it gave no details about any payouts saying it was a personnel matter.

Even after matters go to court, where statements of claim are public, the government has an opportunity to use tax dollars to make mistakes go away without any public accountability. For example, a year ago French construction giant Eiffage filed a lawsuit claiming $250,000 in unpaid fees — plus interest and legal costs — for work on the Buffalo River bridge in the South Slave region.

In its statement of claim, Eiffage said there was not really an issue for trial, since both sides had agreed to a referee to resolve disputes over the project and the referee had already ordered the government to pay the $250,000.

Last month the lawsuit was quietly withdrawn, an indication an out-of-court settlement had been reached.

Both settlements are part of a black hole in government accounting of how tax dollars are spent, where the public is expected to foot the bill, but is not allowed to know how much it is, what the spending is for, or whether it is necessary.