28 June 2006

The pernicious frame

Auditor General John Noseworthy has stated he would like to see an audit of constituency claims going back to 1989. That's the year when the constituency allowance was first introduced.

"Go mad" would be the likely response. "Fill your boots if that will get to the bottom of the problem."

Part of the problem with auditing that far back starts from the assumption that the same system exists today that existed in 1989.

Demonstrably it isn't, even on the basis of the limited information on the current House of Assembly spending scandal that is in the public domain. Here's why.

When constituency allowances were first established, they were limited amounts of money intended to cover the necessary expenses of representing the people of the province. The rules stated clearly that a member of the House of Assembly was entitled to claim expenses for pins, a mail-out, Christmas cards for constituents and similar items. The amounts didn't vary from district to district or if they did vary it wouldn't have been by much. On the face of it, a mail-out to residents of a Labrador district with 2, 000 members would cost less than a district in St. John's with over 10, 000.

Members of the House of Assembly appear to have several other allowances to claim against, most of it referred to in the budget as "allowances and assistance". There was a constituency amount - for the pins, flags, and public meetings, but there was also a travel budget and that's the bit that would have varied and been obviously varied widely. It costs a heck of a lot more to get around Torngat Mountains or on the south coast of the island than it would to represent a St. John's constituency on a bus route. There is likely also an entertainment budget and for some members of the House, such as the leader of the opposition, those particular allowances might be higher than those available to an ordinary member.

Based on several conversations over the past week and on the information the Auditor general has made public, Bond Papers has come to the conclusion that what changed was not how the amounts were presented but how the Internal Economy Commission looked at members' spending. Sometime around 1998, the view took hold that members' allowances were to be looked on as a global amount to be allocated as an individual member saw fit. Fewer restrictions were applied and, consistent with the approach taken in Ottawa, the Auditor General was kept out. If a member didn't overspend the total budget - or at least didn't overspend by much - then everything was viewed as being just fine.

That date - 19981 - matches up with the date for the $2.8 million in questionable spending described by the Auditor General on Tuesday. It also predates, but only by a year or so, the changes to the Internal Economy Commission Act in 2000 and subsequent decisions by the IEC that have already been identified has possibly having contributed to the scandalous events.

Another part of the problem auditing back to 1989 - at this point - comes from something mentioned by AG Noseworthy when talking about questionable payments to four companies.

For one thing, AG Noseworthy told the public on Tuesday that the former finance director of the House had the bizarre practice of over-writing his spreadsheets for each year. We have no idea how long this has been going on. As a result, AG Noseworthy and his officials have had to reconstruct the accounting system.

The size of that task would be daunting: hundreds of accounts and tens of thousands of transactions for one hundred or more individuals over the past sixteen years. Rebuilding those records would take years, and this is allowing that complete records of claims and cheques exist back to 1989.

Even at this stage AG Noseworthy could reasonable have only re-built a relatively small portion of the total picture. There may be enough to indicate there is a wider problem but there certainly isn't a clear picture of what the rules were, what monies were claimed and paid and where those monies went. He may have only been able to reconstruct a general outline so far and therefore cannot see the detail in which the various demons will surely be lurking.

The most obvious approach to take from here onward remains the same as it has been since the outset. Given the scope of the problem and the number of people potentially associated with the problem - many of them still sitting in the House - the House of Assembly or cabinet must appoint a public inquiry.

It can run simultaneously with the police investigation with both being supported by the best forensic auditors available.

If there is a need to investigate back to 1989 or even before that, then by all means let's do it.

But let's start with the period in front of our faces.

Let the investigation be conducted, in part, by a commission of inquiry.

The pernicious frame that has been applied to date and lately the unsubstantiated accusations by the Auditor General about events back to 1989 might lead us in the wrong direction.


1 The Auditor General's report released to date follow the practice of referring to the fiscal year by the calendar year in which it ends. For example, the Auditor general would refer to the current fiscal year as FY2007 even though we are in calendar 2006 and the budget approved earlier in 2006 is set for Fiscal Year 2006.

By adjusting the dates given in the Tuesday report, the year identified as 1999 is actually FY 1998 by the way the budget would have been set.