28 June 2006

The case for a public inquiry

With the latest revelations from the Auditor General of Newfoundland and Labrador, it is difficult to imagine that cabinet will not appoint a public inquiry to get to a complete picture of what happened in the administration of the House of Assembly.

The report from Auditor General John Noseworthy describes unusual circumstances surrounding payment of more than $2.6 million to three suppliers and a further $170, 000 paid to a company owned an operated by the former director of financial operations in the House of Assembly.

This brings the total of allegedly misappropriated and misspent public money to almost $4.0 million. In all likelihood, that number will go higher.

Unfortunately, the public has only a very limited amount of information. The Auditor General's reports, suggestive as they might be, are actually grossly inadequate as a guide to any further action or as an audit by a legislative auditor. Where there should be portraits in sharp focus, we sometimes find stick figures.

The epitome of this type of work is that conducted by Auditor General Sheila Fraser into spending at the Office of the Privacy Commissioner. It is thorough and well documented. AG Fraser's conclusions are, in every respect, supported by the information contained in the report itself.

By contrast, AG Noseworthy's report on Edward Byrne merely demonstrates that something unusual occured. There is no discussion of administrative practices within the legislature, nor does the report identify the nature of the claims allegedly submitted by Mr. Byrne. The report on payments to certain suppliers contains a number of comments that suggest a substantive problem within the legislature and potentially with relationships between the legislature and the Department of Finance. These are not to be addressed by AG Noseworthy, nor will they be dealt with by the police investigation currently under way.

AG Noseworthy has also made claims that are not yet supported by any evidence. He has suggested collusion - a criminal term - yet he has provided insufficient detailed information to support the contention.

Likewise, AG Noseworthy has advocated an audit of member's spending dating to 1989. He does this despite fairly clear evidence in what he has provided to the public that this
circumstance dates from about 1998 and continued and indeed may well have been facilitated by certain decisions taken by the legislature and by the Internal Economy Commission in Fiscal Year 2000 and afterward. Investigators can certainly go back to 1989 or even before that if they wish, however, there is a prima facie case for focusing attention a little more recently.

At his news conference today, AG Noseworthy was asked a sensible question by one reporter: "how did this happen?" His answer provided general and largely superficial comments. His report does give some clues to the issues that AG Noseworthy's work will leave unaddressed and which the police are simply not empowered to deal with.
Internal controls relating to purchases were basically non-existent:
- no segregation of duties - the former Director of Financial Operations ordered goods, indicated receipt of goods and approved company invoices for payment;
These internal controls were not solely the responsibility of the former director to implement. There were others within the House who had clear authority to provide direction on these matters. That such a situation continued for years is inexplicable unless further inquiry is made. A simple question on the signing and approval authorities within the House, asked for example the by IEC established in April 2004, answered truthfully, could have revealed the depths of the problem. We need to know if it was asked and if not, why not. We need to know also if it was answered truthfully.
- and although payment authorization was made on the Government's financial management system, it was most often performed by an official without seeing the original documentation.
This comment, almost cryptic in the Auditor's report, refers to a decision apparently taken by the IEC in 2000 and confirmed by subsequent IECs that the former director of financial operations need not provide any supporting documentation to the Comptroller General in order to generate payments. At the same time, however, we might wonder how it could be that some individuals apparently received overpayments on the order of 10 times the entitlement - something apparent even without documentation - yet no one detected this at all or apparently raised questions about it.

Much of the latest report seems to lay responsibility for the mess solely at the feet of the former financial operations director. However, the fact remains that the former director was accountable to the Clerk of the House who was in turn responsible to the Speaker and the Internal Economy Commission who were in turn answerable to the legislature as a whole. Perhaps the most remarkable aspect of the most recent Auditor's report is that questionable practices not only continued after April 2004 but accelerated from previous rates over the subsequent 21 months. Yet this is an aspect of the current scandal - in some respects the very heart of the entire matter - that AG Noseworthy will not be addressing at all.

If all that were not enough, somehow we must establish how the private sector auditors employed by the legislature after FY 2000 either were negligent or were duped.

Apparently the Auditor General will only be doing enough audit work to establish something odd occured. It will fall to the police - by AG Noseworthy's own comments - to look into any criminal activity. However the broader issues of administration, management and accountability will be handled some other way or ignored altogether. Those who had legal and moral responsibility appear to be escaping notice. They may have done nothing wrong; they may have been deficient in their actions. As it stands right now, they will escape any public scrutiny.

If we are left with these thin Auditor General reports and the widening police investigation, significant aspects of the House of Assembly scandal will not be addressed. Clouds will hang over more than ought to be overshadowed. This is unacceptable if our goal is genuine accountability. It is an unconscionable circumstance if our goal is to find the problems, fix them and restore the integrity of the legislature.

The only way the public can be assured of full and proper accounting is with a public inquiry. It need not be a long or complex inquiry, but it is - simply put - the only way of getting answers to all the questions raised by this complex and troubling episode. As argued here several days ago, in addition to a police investigation, itself supported by the finest forensic auditors available and experienced legal counsel, a public inquiry should be appointed.

The commission of inquiry would comprise ideally three individuals who, "by virtue of their considerable political and other experience, unimpeachable personal integrity, and commitment to parliamentary democracy can recommend all the measures needed to put the House in a proper state and begin the process of restoring public confidence in the most important of our public institutions."

Three individuals that come to mind are the current chief justices of the Supreme Court Appeals and Trial Divisions. A third individual is John Crosbie: member of the Privy Council, former minister of finance of Newfoundland and of Canada and former minister of justice for Canada. Others, such as Lynn Verge or retired Justice Bill Marshall have the requisite qualifications.

Make no mistake: AG Noseworthy's inquiries and the police investigation will not root out the answers to all the questions raised by this scandal which itself is without precedent in the province for over 80 years.

The case for a public inquiry has been made repeatedly in the past week. It now remains for the cabinet to make full and proper use of the Iron Fist which the legislature has provided in the form of a public inquiry. Anything else would be pulling punches.