AG lam­basts prov­ince’s han­dling of Gas Tax Fund

The Southern Gazette - - NEWS - BY GE­ORGE MACVICAR

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.

LO­CAL AGREE­MENTS

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.

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