Wednesday, June 2, 2010

Ontario Lottery Group Hits the Jackpot! Again!

Today, the CBC briefly mentioned that the Auditor-General of Ontario, Jim McCarter, had released his Special Report, available here, on the Ontario Lottery and Gaming Corporation's (OLG) Employee Expense Practices. For those unaware of the OLG, it is a quasi-public agency that is responsible for administering Ontario's provincial lotteries such as Lotto 6/49, Lottario, various instant and sport tickets, five casinos and 17 slot facilities. I realize that this story is not as gripping as the recent release of the Oliphant report on Brian Mulroney's activities in the 1990's or watching more oil bubble to the surface in the Gulf of Mexico but please bear with me. There are some pretty interesting details about just how the OLG spent money.

While this may appear to be of peripheral interest to those readers living outside of Ontario, it does give us a window into just how money, that could have helped the Ontario government fund health care, pave highways and other programs was wasted by those who felt that they were entitled to spend lottery dollars on themselves. It also shows us that regular audits of all aspects of government operations at all levels (most particularly, at this juncture, Parliamentary expenditures) should be a priority.

The Ontario Lottery and Gaming Corporation has been in existence for 32 years. In that time, they have generated over $32 billion in revenue that has been distributed to support various government programs in Ontario. In the 2008 - 2008 fiscal year alone, OLG generated $3.8 billion in economic activity on top of $1.6 billion in lottery prizes. Profits generated by the OLG fund various public programs such as health care and promotion of fitness, sport and culture. As well, in 2010, $120 million will be directed to the Ontario Trillium Foundation which distributes the funds to charitable and non-profit organizations. The OLG has about 7700 full and part-time employees; its board of directors oversee the entire operation and reports to the Ontario Minister of Finance. The Management Board of Cabinet, a committee that advises the Ontario government on money management issues, has classified the OLG as an "operational agency" that receives most of its revenues from commercial activities. This has resulted in OLG having flexibility in making its own decisions; however, the Management Board still wanted OLG to operate in a manner that will manage the public's resources prudently and that its expenditures will be subject to Management Board guidelines.

In September 2009, Ontario Finance Minister Dwight Duncan requested an audit of OLG after firing CEO Kelly McDougald (annual salary - $400,000) with cause. At that time, the entire board of directors also resigned. Ms. McDougald was released from her duties after it came to light that OLG employees were expensing items that would be considered unacceptable by any reasonable measure ; examples included a $3700 dinner and attendance at the Sound of Music musical for 38 people.

From the Auditor-General's report released today, I have selected some expenses that drew my attention:

1.) The lottery division purchased season's tickets and corporate boxes at sporting events for entertaining OLG's key retailers at a cost of over $100,000 annually excluding the cost of food and drink which regularly exceeded $100 per person being entertained. What is interesting about this expense is that OLG is essentially a monopoly; they have no need to "wine and dine" their retailers.

2.) A total of 26 senior employees were leased vehicles with costs ranging from $41,519 to $57,512. This is well in excess of the maximum of $30,000 that is set by the Province of Ontario for non-hybrid leases of deputy ministers. As well, an additional 16 executives opted for car allowances that ranged from $17,000 to $24,000 annually. The car lease/car allowance benefit also was far more pervasive among OLG employees than the norm in government; in the case of the Ontario government, only deputy ministers are provided with vehicles.

3.) OLG senior staff often claimed expenses for meetings held in-house or off-site. Most of the expenses for these meetings was for meals; unfortunately, no policy was in place to determine what a reasonable meeting-related meal charge was. Additional meeting expenses included reserving meeting rooms, renting audio-visual equipment etc. In 2008 - 2009, the total spent on meetings and hospitality was $1 million.

4.) Under OLG rules, it was acceptable for their employees to stay in a hotel when they attended an OLG-sponsored event even if the event was held in their city of residence. For example, for a Toronto sales meeting in June 2009, OLG reserved rooms for 90 employees, 40 of whom lived in the GTA. These rooms were later cancelled, however, the cancellation charge for 22 of the reservations was $3600. Fortunately, as of August 2009, this policy has been changed.

5.) Many cases of missing transportation receipts were noted by the Auditor-General. For example, in the case of travel on the 407 ETR, only the total charge from monthly invoices were submitted. There was no way to determine what portion of the invoice was for business purposes and what portion was for personal use. As well, the cheapest alternative for airport parking was not always selected. In one case, an employee submitted a claim for $261 worth of airport parking (without a receipt, mind you) and it was discovered that this amount was for three or four days of parking.

In general, the Auditor-General found that OLG complied with their own expense policy, however, claims for transportation (taxis, tolls, parking etc.), meal and hospitality expenses were often claimed without detailed receipts or explanations making it difficult to ascertain whether the expenses were incurred on legitimate OLG business. As well, since no guidelines were set for "reasonable meal claims", responsible spending practices were frequently not followed. It was also found that employees recurrently booked hotels that were more expensive than what would have been reasonably expected often staying in hotels in their city of residence when attending an OLG event as noted above.

Things have changed in the past year at OLG. In February 2010, the Ontario government officially announced that Paul Godfrey would be taking the position of Chairman of OLG and named five new Board members. As well, in September 2009, it was announced that OLG expenses were to be reviewed by Ontario's Integrity Commissioner. In the same announcement, it was revealed that employees that claim unacceptable expenses will be forced to repay taxpayers. Starting in fiscal 2011, OLG will be disclosing the expenses of their senior management, Board of Directors and CEO on their website along with the expenses of the top five employee claimants.

While all of this may appear to be moot to those of us living in other provinces, it suggests to me that regular auditing of government expenditures at all levels is necessary to prevent continued abuse. In recent weeks, the federal government's Board of Internal Economy has done everything in its power to prevent Canada's Auditor-General Sheila Fraser from examining Parliament's expenditures. The example of OLG would suggest to me that regular and thorough examination of all government departments and agencies is required to ensure that the best interests of taxpayers are being looked after.

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  2. I remain amazed w the profligate spending habits of the public service here at home and internationally. The most humerous excess was the British MP caught in an audit after expensing the cost of cleaning his 'moat'. Aside from the obvious contradiction of being a democratic MP & owning a castle with a 'moat', expensing such a political landmine of an item shows political stupidity of the highest order.

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