AG lambasts province’s handling of Gas Tax Fund
Auditor General John Noseworthy believes the provincial government have given certain communities preference, in the delivery of the CanadaNew foundland and Labrador Gas Tax Fund.
An initial five-year deal, approved by the federal government in 2005, provided funding of $5 billion as the provinces’ share from the federal gasoline exercise tax to support environmentally sustainable infrastructure.
A Canada-Newfoundland and Labrador Agreement on the Transfer
of Federal Gas Tax Revenues then came into being in 2006 covering a 10year period up to March 2015. The total transfer of funds will be approximately $207 million.
The Department of Municipal Affairs administers the agreement, which provides funding through the province to all 282 municipalities (277 municipalities, five Inuit Community Governments and other eligible recipients).
Mr. Noseworthy, in an executive summary, suggested the late signing of the agreement (August 2006) and noncompliance of audited Annual Expenditure Reports (AERs) by both the provincial government and municipalities had meant delays in approving funds for projects.
He cited as an example, “In 2009, the province had to wait approximately four months (March 2009 versus November 2008) before it received $8.2 million.”
The federal government wants AERs from the provinces by Sept. 30 each year.
Mr. Noseworthy recognized in his audited financial statements relating to the provincial AER, for fiscal year 2008, “16 municipalities received excess funds totalling $222,909 while for fiscal year 2009, four municipalities received excess funds totalling $11,596.
“Contrary to the agreement, the province provided funding of approximately $1 million related to six waste management projects before the formal adoption of eligibility criteria by the Oversight Committee. Although the provincial AER for the 2008 fiscal year outlines the $1 million in funding, the criteria were not approved until January 2009.”
The Auditor General suggested the end result was “without appropriate assessment of projects relative to approved criteria, some projects approved for funding may not ultimately qualify.”
He said this has occurred in at least one case where the province was forced to fund the project itself.
ST. JOHN’S NOT ENTITLED
Mr. Noseworthy also reported “ The province provided $11.8 million in funds to the City of St. John’s in March 2009, in excess of the allocation limit set by the agreement for waste management initiatives and before the funds were received from the federal government.
“Pursuant to the agreement, the city was not entitled to these funds until the next fiscal year. As a result, general funds of the province were used to make the payment to the city.”
The A-G claimed without the funding from the province, this would have resulted in a deficit in the Gas Tax Fund of approximately $9.4 million as of Mar. 31, 2009.
Mr. Noseworthy said municipalities are just as much at fault in not meeting AER deadlines of June 30 each year.
The report found “67 instances where the AER for 2008 (due June 30, 2009) from the municipalities were not submitted as required. The delay ranged up to 114 days past the deadline.
“Such delays can result in funds not being made available for municipalities and provides difficulty for the province in the preparation of its AER for the federal government.”
Common deficiencies in the municipalities’ AERs included such things as no audited report attached, not all required appendices included and funds not invested to earn interest as required.
To access funding from the province under the program, the province requires municipalities to enter into Local Government Gas Tax Funding Agreements. The agreement requires a municipality to develop an Integrated Community Sustainability Plan (ICSP) by Mar. 31, 2009.
However, the majority of municipalities had not developed the required ICSP by that date. As a result, the province extended the deadline for municipalities to submit their completed ICSPs to Mar. 31, 2010.
Mr. Noseworthy identified one municipality had received the first and second semi-annual installments, when only the first installment was due.
“As a result, this municipality received preferential treatment and potentially saved costs many municipalities have to incur related to interim financing.”
Two other municipalities received payments prior to the department receiving an AER.
The Auditor General charged a federal-provincial oversight committee was not adequately monitoring the progress of the program under the agreement. Since the agreement was signed in August 2006, the committee has only met twice – once in October 2007 and again in February 2008.
The department established a Gas Tax Committee to monitor the progress of the program, provide advice and support to the Gas Tax Secretariat, and review and approve all Capital Investment Plans for projects.
Mr. Noseworthy said “ The Committee did not always complete minutes to document decisions of meetings. Furthermore, minutes that were available were not signed and Records of Decisions required by the committee’s terms of reference were not prepared or signed.”
As a final point, the AG Report pointed to a lack of a comprehensive information system to facilitate the operation of the program. The department was using a variety of spreadsheets and other electronic files, which are stored on a number of network drives.
Department officials indicated the spreadsheets were time consuming to maintain, and were shared jointly on the department’s network with no controls to prevent risks of unauthorized changes and duplication.
Auditor General John Noseworthy.