26 February 2008

NL AG hoist by petard of own misleading statements

Auditor General John Noseworthy is crying foul at supposedly being shut down in his efforts to audit the offshore regulatory board, not for financial issues but for safety, environmental and resource management issues.

Noseworthy issued a surprise report today.

Here are some quick observations:

1.   No statutory authority to audit offshore board. The AG website does not list the offshore board as being an entity subject to audit, even though Noseworthy now claims to have a legal opinion stating otherwise.

As such, Noseworthy's office has no legal right to demand access to the offshore board's operations. Neither the federal nor provincial enabling statutes for the Atlantic Accord (1985) give the provincial auditor general the right to audit the offshore board.

As further proof that Noseworthy himself does not consider the offshore board to fall under his jurisdiction, his 2007 report - issued three weeks ago - makes no mention of the offshore board and its financial statements for any year.

2.  AG fails to meet requirements of own legislation

Noseworthy cites supposed obligations under the Auditor General Act to report a failure by an entity subject to provincial audit to provide access to documents.  However, if Noseworthy's office doesn't believe the organization is subject to audit, he has no legal authority to conduct any review.

Beyond that, even if Noseworthy is right on his legal ability to audit the offshore board, he's failed completely in this case to demonstrate the requirements - set out in provincial law - necessary to conduct an audit of an entity whose financial statements are audited  - by law - by an external agency.

Under s. 14(3) of the Auditor General Act,

Where the auditor general is of the opinion that the information, explanation or document that is provided, made available or delivered to the auditor general by the auditor referred to in subsection (2) is insufficient to permit the auditor general to exercise his or her powers or duties under this Act, the auditor general may conduct or cause to be conducted an additional examination and investigation of the records and operations of the agency of the Crown or the Crown controlled corporation that the auditor general considers necessary.

By both federal and provincial legislation, the offshore board uses external auditors to produce its annual financial statements.

3.  AG ignores other entities under his jurisdiction In his 2007 report, Noseworthy noted that he had not received audited financial statements on four Crown corporations - Hydro's subsidiaries - for the year ended December 31, 2006. Aside from that mention, Noseworthy has not indicated publicly he has taken any action using his legal powers to deal with that problem.

To make it worse, this is not the first year Hydro's subsidiaries have failed to meet their legal requirements to provide audited statements to the AG. Noseworthy's website indicates that he has not received financial statements from the four corporations since February 2006:

Company                                                                 Year ending             Date rec'd

Churchill Falls (Labrador) Corporation Limited      31 December 2005    14 February 2006
Gull Island Power Company Limited                      31 December 2005      7 February 2006
Lower Churchill Development Corporation Ltd     31 December 2005       7 February 2006
Newfoundland and Labrador Hydro Electric Corp  31 December 2005 14 February 2006
Twin Falls Power Corporation Limited                   31 December 2005 7 February 2006

4.  Offshore board willing to have joint federal/provincial audit.  For all the posturing inherent in Noseworthy's public report, the offshore board still has refused to give the auditors access to the organizations financial and operational records.

In fact, Noseworthy's claim of being refused access is false:

This Report is submitted to the House of Assembly under the authority of Section 12(1) of
the Auditor General Act (the Act ) relating to the refusal of the Canada - Newfoundland and
Labrador Offshore Petroleum Board (CNLOPB) to provide my Office with unrestricted
access to information necessary to conduct a review of CNLOPB operations.

Noseworthy's own report gives the information that proves his office has not been refused access to the offshore boards records.  According to Noseworthy, the board repeated its view that “…any audit should be conducted jointly by the Auditors General of the Province and the Government of Canada.”

That's hardly a refusal by any definition of the word.

So if the Auditor General can't get his facts straight or abide by the law, what's the point of having him?