Public sector unions in this province have raised a lot of questions in recent years about the wisdom of pursuing public-private partnerships (P3s) to fund major infrastructure projects and deliver public services.
In particular, our research has found that P3s are more expensive than traditionally built projects, and lack public accountability and transparency.
Now, thanks to the province’s best-known and most trusted forensic accountant, we have a very credible voice saying that the reporting system used by the B.C. auditor-general’s office to assess up to $10 billion in P3 projects is prone to manipulation by P3 promoters.
The Canadian Union of Public Employees and the Hospital Employees’ Union recently retained Ron Parks and his firm, Blair Mackay Mynett Valuations Inc., to conduct a review of the province’s P3 reports and the role of the auditor-general in preparing them.
Specifically, we were seeking answers to questions that should concern all British Columbians.
First, is the auditor-general’s P3 reporting process appropriate and satisfactory from a public point of view? Second, does it provide assurances that there are going to be real cost savings for the public from P3s? And finally, to what degree can provincial ministries and government rely on the process?
The results of the probe pose a challenge for the new, Liberal-appointed acting auditor-general Arn van Iersel. Among other things, Parks found that the auditor-general’s process for reviewing three major P3s – the Abbotsford Hospital, the Sea to Sky Highway expansion and the Canada Line –“does not provide assurances that there are going to be real cost savings for the public.”
In all three cases, the auditor-general did not prepare a direct independent audit but instead reviewed value-for-money reports prepared by organizations that manage or promote P3s.
Partnerships BC – a government agency mandated to advance P3s –prepared the Abbotsford Hospital and Sea to Sky Highway reports. The Canada Line report was prepared by Canada Line Rapid Transit Inc., the TransLink subsidiary responsible for implementing the project. Neither of these are neutral bodies.
In two of these cases, the auditor-general’s office was paid a fee to conduct the review – a practice Parks says should stop in order to heighten the public’s perception of independence. He said the auditor-general should prepare his own direct reports on P3s “to distinguish his information and conclusions from those who have a vested interest in demonstrating the value for money of the P3 model.”
Two other conclusions in the Parks report provide a direct challenge to politicians.
The first is that the reporting process is “appropriate only from the standpoint of dealing with forward-looking information, which cannot be audited.” The second is that legislators, provincial ministries and the B.C. government need to “exercise restraint in adopting conclusions that the auditor-general has not reached or set out in his reports.”
What this means is that too many cabinet ministers have been misusing the work of the auditor-general to overstate his support for the privatized projects.
For example, during the 2005 election, Premier Gordon Campbell told the Abbotsford Times that the auditor-general had said the province saved $39 million with a P3 hospital in Abbotsford.
“It may be that some people do not like the P3 model,” Finance Minister Carole Taylor said in the legislature on March 7, “but the fact that this was signed off by the auditor-general says there was value for taxpayers.”
In fact, the outgoing auditor-general said neither of these things. His reports, which only reviewed the work by P3 promoters, could only go as far as to say their assumptions were “plausible.” With the limitations inherent in only reviewing work by P3 promoters rather than writing his own report, the auditor-general was actually quite frank.
In the case of the Sea to Sky Highway review, he stated bluntly that based on the predictions in the report, “variations may be material. Accordingly, I express no opinion as to whether the expected results will be achieved.”
When it comes to the spending of billions of taxpayers’ dollars, “plausible” is not good enough. We need an adequately funded office of the auditor-general that can produce its own reports on P3s and be involved from start to finish on such projects. Interestingly, Parks makes that very recommendation in his report.
Would the federal sponsorship scandal ever have been uncovered if our national auditor-general had worked under the restrictions currently faced by B.C.’s auditor-general? That’s a question citizens might want to ask themselves.
Judy Darcy is secretary-business manager of the Hospital Employees’ Union; Barry O’Neill is B.C. division president of the Canadian Union of Public Employees.