Alberta’s energy war room under fire in auditor general’s annual report

The UCP government’s controversial energy war room has been scolded by Alberta’s auditor general for financial oversight issues, including the awarding of $1.3 million in sole-sourced contracts without adequate justification or documentation. 

The Canadian Energy Centre (CEC), a provincial corporation, is among several government agencies scrutinized in an annual report released Thursday by Auditor General Doug Wylie.

In the report, Wylie details more than $1 billion in adjustments to the government’s budget, triggered largely by accounting errors and inaccurate projections.

The auditor general highlights “significant audit findings” relating to crude-by-rail contracts, Keystone XL pipeline agreements, the Sturgeon Refinery and the province’s Assured Income for the Severely Handicapped and Income Support programs (AISH).

‘These are significant errors’

“These are significant errors that were found and required a significant amount of dialogue with the various different departments involved,” Wylie said in a briefing with reporters Thursday.

“It is concerning. You can have controls, but you have to make sure you are following them.” 

He recommends the CEC improve its contract management processes by bringing in controls to ensure contracts are “valid, supported and adequately approved.”

Wylie also says the centre should improve documentation so it can show that contracting decisions “are justified and providing value for money.”

The review details improper hiring practices for the CEC’s team of writers, website developers, photographers and campaign managers tasked with combating what the province considers misinformation on Alberta’s oil and gas industry. 

The provincial corporation freely awarded sole-sourced contracts without documentation, spent money without board approval and paid contractors before their contracts were signed, auditors found. 

The CEC was part of the “fight-back” strategy Jason Kenney and the United Conservative Party campaigned on during the April 2019 election. 

The idea was for the government to set up a communications “war room” to counter what the government considered to be incorrect information about Alberta’s oil and gas industry.  

Since it was established in October 2019, the centre has been embroiled in a series of public gaffes, including a copyright infringement spat and a series of tweets targeting the New York Times, which prompted an apology from the CEC’s managing director.

In his annual report released Thursday, Doug Wylie called on the Canadian Energy Centre to improve its financial oversight and contracting protocols. (CBC)

Wylie details a series of financial management issues at the CEC.

Auditors found it lacked adequately-documented contracting policies. Some expenses were incurred without appropriate approvals. Appropriate documentation for contracts, most of which were sole-sourced, was not maintained.

During the fiscal year ending March 31 that was examined by auditors, external contractors accounted for about $1.3 million of the organization’s $2 million in operating expenses. 

“The CEC relies upon contractors to perform many of its main business activities,” the report says.

“This includes activities like website design and development, story writing, custom photography, media awareness campaigns, as well as the provision of services for supporting corporate functions, such as accounting and information technology.” 

Unlike open bidding, sole-sourcing is a non-competitive process. Provincial procurement guidelines dictate that sole-sourced contracts are only permitted when only one known source exists, or when a specific contractor has specialized expertise.

Sole-sourced government contracts of $10,000 or more are generally made public by the province but because the CEC is incorporated, much of its operations remain secret and are not subject to freedom-of-information legislation.

Wylie found that CEC contracts were being awarded without adequate evidence that the successful bidders were solely qualified for the work, or that the services would be provided at a reasonable cost.

“The AG found instances where there was insufficient documentation to explain how a vendor was chosen based on proposals provided,” the report says.

Auditors found a draft expenditure and procurement document but the policy had not been approved by the board and none of the policies described in the document were being implemented.  

The audit also found two instances where expenses were incurred prior to obtaining the required board approval for contracts exceeding $75,000, and three instances where expenses were incurred before a contract had been signed by both parties.

“Albertans need assurance that the amount of money invested into the corporation is appropriate and well spent,” Wiley said in the report. 

“Ineffective contract management processes may result in wasted time and public funds, potential or perceived conflicts of interest, and an increased risk that Albertans are not receiving the best value for the investment of public dollars in the organization.” 

Other issues highlighted in the audit include: 

• A $637-million adjustment to expenses relating to 11 crude-by-rail contracts. 

• A $100-million adjustment to assets and liabilities of the Keystone XL pipeline agreements.

• A $795-million adjustment to expenses for the Alberta Petroleum and Marketing Commission related to the Sturgeon Refinery, due to problems with a cash-flow forecasting model. 

• A $102-million adjustment to the Assured Income for the Severely Handicapped (AISH) program expenses, and a $50-million increase to the Income Support program expenses, due to accounting that only recorded benefit costs for 11 months of the fiscal year.

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