As published in the Wellington Times, Wednesday October 25, 2017.
Under the enabling statute, the Ontario Auditor-General (A-G) is non-partisan, reports to the Legislative Assembly and protects the public interest. Thus when the current government does not present financial information fairly and transparently, she must speak out.
And that’s exactly what Bonnie Lysyk, the current Auditor-General, did in her devastating Special Report released on October 17th, 2017, dealing with the so-called Ontario Fair Hydro Plan which became law on June 1st, 2017. To say that she was concerned about fiscal transparency, accountability and value for money under that Plan would be putting it mildly. Here’s a summary.
The A-G cannot question the government’s decision to reduce Ontarians’ electricity bills, it being the government’s prerogative to set policy. Her valid concerns were that the planned accounting for the budgets and consolidated financial statements was incorrect and that the government knew beforehand that its scheme would cause significant unnecessary costs for Ontarians.
The government’s deliberate intention was to avoid the costs associated with the hydro rate reduction affecting its fiscal plan, to avoid showing a deficit in budgets and consolidated financial statements for 2017/18 to 2019/20 and to show no increase in the Provincial debt.
It created a needlessly complex accounting/financing structure to achieve that deliberate intention, utilizing officials and staff from eight ministries and organizations and hiring private sector accountants, lawyers, bankers, broker-dealers and investment advisers. Those outside advisers cost Ontarians a minimum of $2 million, one law firm receiving a retainer of $500,000.
Senior civil servants involved warned in advance that the design planned by the government would result in higher costs for Ontarians, that it was doubtful if the Canadian Public Sector Accounting Standards would permit the accounting treatment planned and that the A-G would likely disagree and express her concern about the additional cost planned to be incurred.
Indeed, the A-G found as facts that the complex accounting rules applied are NOT in accordance with the Canadian Public Sector Accounting Standards and that in essence the government was making up its own accounting rules.
Under the government’s plan, money will have to be borrowed to fund the hydro bill reductions and from 2022 on, Ontarians who pay hydro bills will be charged more than the actual cost of producing electricity to repay that borrowing. That amount plus interest will be at least $39.4 billion.
A future government could decide not to charge this just to ratepayers but to all Ontarians generally.
The increase in the Province’s net debt overall will be $26.2 billion.
The complicated scheme involves both Ontario Power Generation (OPG) and Independent Electricity System Operator (IESO), both controlled by the Province. In addition, the government will direct another of its creatures, the Ontario Energy Board (OEB) to approve rate changes as required.
In 2017, the A-G gave the government a “qualified” audit opinion, that is an opinion that the financial statements contained one or more material misstatements or omissions resulting from the misapplication of Canadian Public Sector Accounting Standards. Specifically, she found that the net debt and the accumulated deficit were understated by $12.429 billion for 2016/17 and by $10. 985 billion in the previous year.
The A-G ended her Special Report by recommending that the government record the true financial impact of the Fair Hydro Plan’s electricity rate reduction on the Province’s budgets and consolidated financial statements; and use a financing structure to fund the rate reduction that is least costly to Ontarians.
The above is just a summary of the basic, important, points. The A-G was extremely thorough in explaining the various requirements and actions involved in straightforward, understandable, language. She certainly spoke out as her mandate requires and is to be congratulated by all Ontarians who care, irrespective of party. Her Special Report was indeed a bombshell, devastating in its logic and conclusions.
The government’s reaction? In effect “we disagree with the Auditor-General and it’s just a question of accounting discussion”.
The government has borrowed money to fund the reduction in hydro bills, incurred incredible cost in so doing and pushed the repayment of that cost down the road beyond the election scheduled for June, 2018, and with deliberation broken accounting rules along the way.
What the A-G’s Special Report does is continue the criticisms of herself and her predecessor of many aspects of the undemocratic Green Energy Act, the scam imposed by a combination of this government and the wind industry particularly on rural Ontario. Every day, more power is produced than Ontario needs and every day the excess is sold to neighbouring States and Provinces at a loss while wind and solar proponents are paid NOT to produce. All these costs are paid by Ontarians in their hydro bills and Provincial income tax.
Thank you Auditor-General Lysyk. A ray of hope and decency in the swamp that the current government has become.