East Side Road Authority poorly managed, auditor general finds
CBC News | Posted: September 20, 2016 6:49 PM | Last Updated: September 20, 2016
Norm Ricard's report identifies issues at now-defunct provincial agency
Several problems related to the management of the now-defunct East Side Road Authority have been identified by Manitoba's auditor general, who says a number of standard accounting practices were not followed.
Reports were late and in some cases, expense reviews weren't done, making it difficult to track exactly where the money was going, Auditor General Norm Ricard says in a new report.
"They needed stronger administrative practices and accounting practices all the way around," Ricard told CBC News on Tuesday, after he released the 32-page report on the Manitoba East Side Road Authority.
The Progressive Conservative government announced in May it's dissolving the authority and will transfer responsibility for the agency to the provincial Infrastructure Department. Employees began receiving termination notices last week.
Ernie Gilroy was the authority's CEO until he was replaced by a deputy minister earlier this year.
Gilroy called the auditor general's report into the East Side Road Authority "fair ball."
"This report indicates nothing to suggest that anybody on the staff of the East Side Road Authority has behaved inappropriately. And that to me is the most important thing to put on the record," said Gilroy.
He admitted there were problems at the authority tracking exactly the outcomes of funds spent.
"We were measuring how much money we were spending in each of the communities. Having said that, I accept fully his comment that there should be strengthening those measurable yardsticks. I don't disagree with that."
Infrastructure Minister Blaine Pedersen called the authority a "duplicate bureaucracy, bloated and designed to overlap what was already being done well by an existing government department."
"Our government is moving Manitoba away from the politics of special interest and waste and toward value for money and public interest."
Premier Brian Pallister said the province will continue working on the East Side road project, but with better oversight in place.
NDP created authority in 2009
The East Side Road Authority was created by the NDP government in 2009 to administer millions of dollars in contracts to build all-weather roads to 13 remote communities on the east side of Lake Winnipeg that only had winter roads.
The project's "total capitalized cost" was $325 million as of March 31, 2015, the auditor general's report says.
The authority was designed to make sure construction helped residents in remote, primarily First Nations communities, including providing job training, mentoring and pre-construction work contracts. It developed an Aboriginal engagement strategy that included community benefits agreements with the communities.
Gilroy said the authority created a 1,000 jobs and trained 325 people in the 13 communities involved in the project.
"They were an organization focused on their mandate to build a road, but also to provide benefits to the communities," Auditor General Ricard said.
"Mr. Gilroy was passionate about providing an added benefit to the communities. That was their focus and it's commendable, but it has to come with strong administrative practices. They have these ideas and six components to it, but they have no measurable objectives."
The auditor general's report found objectives for the Aboriginal engagement strategy had not been developed, and that many gaps existed in how the community benefits agreements and the related work contracts were being managed.
Berens River Chief Hartley Everett said his community was disappointed with the number of training positions available. The ongoing road project is currently about 22 kilometres away from his community.
"There was a lot of local people willing to take the training but ... the East Side Road they kept stalling and stalling."
Everett said he looks forward to a new relationship working with the Progressive Conservatives.
'What are you trying to accomplish?'
The report found that in five cases, investigators could not find any plan for mentoring community members for long-term job skills.
The East Side Road Authority was supposed to oversee "capacity building allowances," in which private companies were to partner with First Nations corporations, providing mentoring and training with the goal that they eventually become independent businesses. The allowances were then intended to diminish over time.
However, the report found the road authority was not tracking the number and amount of allowances paid out, how the allowances were being reduced over time or how the community corporations actually benefited from the allowances.
"They have this Aboriginal engagement strategy. It's meant to say, 'How are we going to provide the benefits to the Aboriginal communities on the east side?' But what we found that it was weakly implemented. They have these ideas, but no measureable objectives," Ricard said.
"It's weak administrative practices around the implementation of the Aboriginal engagement strategy. They needed measurable objectives and they needed performance targets — what are you trying to accomplish? What's the outcome?"
Ricard added the road authority failed to create a risk management process and did not properly asses the progress community corporations were making towards becoming viable companies.
Financial issues were first raised by Patricia Scott, the former road authority finance manager.
Scott was hired as finance manager in 2012 for a four-year term and oversaw a department with seven accountants. She said shortly after she began working for road authority, she started hearing about financial irregularities.
In March 2015, she filed a whistleblower complaint with the provincial ombudsman, whose office transferred the file to the provincial auditor.
The auditor general's report was already being finalized at the time the road authority was dissolved, but the findings are still invaluable to Manitoba Infrastructure, Ricard said.