Auditor general uncovers more troubling financial irregularities at Alberta Energy Regulator

The former head of the Alberta Energy Regulator, Jim Ellis, knowingly broke provincial compensation law by handing cash bonuses of $21,000 to two senior executives, one of several troubling financial abuses revealed by the auditor general in his latest report.

In a report released Thursday, Auditor General Doug Wylie confirmed — as first reported by CBC News — that Ellis and another senior AER executive commuted from their homes in British Columbia under work arrangements that were not properly approved and cost tens of thousands of dollars.

The auditor general also found the AER intentionally did not assess taxes on employer-subsidized parking, which cost the regulator $1.3 million.

The audit uncovered evidence that the "AER was in fact informed about the parking as a taxable benefit by a Department of Energy employee on Nov. 26, 2014.

"We also determined the former AER (vice president) of corporate services directed his staff not to take action," the report states. The vice-president was Rick Brown, a friend of Ellis'.

The AER decided to pay Canada Revenue Agency on behalf of its employees, which cost the regulator $1.3 million.

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"Generally, I would describe it as very concerning," Wylie told reporters at a press conference Thursday.

"I would also describe it as atypical of what we see of the operations of the agencies, boards, and commissions in Alberta."

Wylie said his office has not reported its findings to any law enforcement agency. He said the new AER board would make that decision. 

CEO improperly approved cash bonuses

Wylie's audit found that in March 2018, Ellis approved cash bonuses of $21,000 for two AER executive vice-presidents, despite provincial legislation passed the previous year that prohibited such bonuses. Ellis described the bonuses in terms of days off with pay, but the auditor general found they were clearly cash bonuses.

"You will receive a lump sum payment of $21,000 less required deductions which is equivalent to 20 days of leave with pay," Ellis wrote to one of the executives.

"This payment is in recognition of the additional time and efforts you have provided since moving into the (executive vice-president) role last spring."

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But Wylie's audit revealed the AER and Ellis were aware of the legislation that prevented these bonuses.

Emails produced for the audit discussed costing scenarios regarding vacation days for the two executives "and how amounts could be given without coming across as circumventing the spirit and intent" of the legislation.

The auditor report states Ellis also authorized a bonus for the AER's former chiefs of staff — $6,000 in 2017, and $5,000 in 2018 — and they were the only individuals outside the senior executive team who received the benefit.

"Similar to the two (executive vice presidents), a cash payment was made to the chiefs of staff and characterized as leave with pay. We found no documented rationale to support the selective approach to granting additional leave to the chiefs of staff versus others in the organization."

AER paid for executives to commute from B.C.

The audit confirmed previous CBC News reporting that AER CEO Jim Ellis was paid to commute from his home in the Okanagan to work in Calgary. Auditors found the chair of the AER approved Ellis's request after he asserted the chair had previously agreed to the arrangement.

But when auditors interviewed the chair, "he told us he only agreed that AER would cover the costs associated with changes in airfare resulting from work-related scheduling changes that impacted travel times. 

"We found no formal documentation to corroborate the accuracy of either the former AER board chair or the former AER CEO's account of what was agreed to."

Auditors also found no evidence that the board chair at the time sought to confirm this alleged previous agreement.

The AER, the report states, paid about $20,000 in travel costs for Ellis from his B.C. residence to Calgary from Jan. 1, 2018 until his departure in Nov. 2018.

CBC News has reported that two other AER executives were also commuting from their homes in B.C.

The AER, funded by a levy charged to the energy sector, is one of Alberta's most recognized public agencies. It oversees the massive energy sector and is expected to ensure the safe and environmentally responsible development of the industry.

'Reckless and wilful disregard'

Last month, three provincial watchdogs concluded the AER wrongfully used its resources to establish another company outside its mandate, while Ellis displayed "reckless and wilful disregard" for the proper management of public funds.

In damning reports, the ethics commissioner, auditor general, and public interest commissioner concluded the AER's board oversaw a regulator whose executives travelled by air first-class and stayed at $500-per-night hotels, plotted how to privatize the province's intellectual property, and spent millions of dollars in public money on a private venture in order to secure their future employment.

In some instances, the board knew of the behaviour and allowed it to happen, while at other times, it was completely unaware of activities. Board members not only failed to provide oversight, but they often didn't even question senior leadership.

Energy Minister Sonya Savage announced in September that a review of the AER was being launched and she appointed an interim board to chart its future.