- »Auditors Express Concern at ALC Reforms
Auditors Express Concern at ALC Reforms
The Atlantic Lottery Corporation was supposed to be reforming their expenditures and overall governance following a 2016 audit. From excessive spending on non-essential activities to political donations, the audit produced a damning report nearly three years ago.
A recent update from Atlantic Canada’s auditors general say much of the reform work has yet to be done, with only 22% of recommendations addressed since the report was issued.
In mid-June, the group of auditors from New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador announced that the Atlantic Lottery Corporation was far behind in implementing changes suggested by the 2016 report.
Of the recommendations given to the four provincial governments in 2016, only 22% of those suggestions have seen action taken.
The latest report noted that the most outstanding lack of action pertained to the governance of the ALC, who offer online gambling and games with different banking options in Atlantic Canada. In addition, the provinces had not excluded elected officials and government employees from the ALC board, and they had not removed voting rights from all public servants. In fact, the provinces disputed some of those recommendations and claimed civil servants are beneficial as voting directors.
The latest audit report noted, “Failure to implement these recommendations risks impeding the board’s fiduciary duty to the corporation and its overall effectiveness in providing sound governance.”
There were five specific orders from the 2016 report that, the auditors said, may hinder the provinces’ ability to evaluate the ALC’s performance and future sustainability. This included a mandate to perform in-depth reviews of the mandate and how it works or could work better with each government’s individualized gaming policies.
However, all provinces have said they reviewed the mandate and forwarded instructions to the ALC. In addition, the ALC had been updated to make some concessions with the ALC board, requiring staggering three-year terms for directors and using a competency-based process to appoint the eight independent voting members of the board.
Just months after the 2016 audit, the initial 16 recommendations for ALC were implemented, which prompted the auditors to commend them.
As Nova Scotia Auditor General Michael Pickup said, “This is not a situation where these are recommendations that they don’t intend to implement. It’s not like they haven’t done anything.” He also noted that most recommendations were “practical and feasible.”
Original 2016 Audit
The last audit before 2016 had been done 20 years prior in 1996. And the results revealed stunning expenses and mismanagement on various levels of the ALC.
The findings contained in the 69-page report showed a lack of coordination between the ALC board, management, and the four governments that own it.
Corporate spending was one of the most egregious violations that prompted a great deal of backlash from the general public. Executives received pay hikes that were outside of the norm. One expense showed $73K spent on concert and event tickets for stakeholders. There were 125 tickets to a 2014 music festival alone that cost $14K in total, which was in addition to 270 tickets it received at no cost. A 2015 rock concert saw the ALC spend $48K on tickets, some of which were for promotional purposes but 26 of which went to government officials. Other expenses showed $14K spent on a 2013 Christmas party for the staff, as well as $111K paid for other holiday parties from 2013 to 2015.
The audit did not mince words. “It is not appropriate use of Atlantic Canadians’ money for Atlantic Lottery to be incurring these expenses.”
ALC responded that many of the expenses were required to engage with shareholders, but many of the expenses showed no evidence of the recipients of the gifts being shareholders or even necessary.
The outrage that ensued prompted the ALC to immediately implement most of the recommendations regarding spending and parties.
At the time, ALC CEO and President Brent Scrimshaw said that tighter controls were put into place right away. “This is a time of economic restraint in Atlantic Canada,” he had said. “The people of this region and our governments are tightening their belts. We must do the same.”
From that initial report, some of the most disputed findings related to the independence of the board. As already mentioned, the suggested changes from the audit are still being contested in some respects, and it is unclear if the auditors general and ALC will be able to come to any agreement about them going forward.
The auditors plan to keep following up on their initial recommendations and speaking with ALC in order to find common ground and resolve issues that the officials found to be unacceptable.