'I'm disgusted': MHAs condemn spending and lack of oversight detailed in Nalcor audit

Paul Lane, the Independent MHA for Mount Pearl-Southlands, didn't mince words Friday on the extravagant expenses by Nalcor employees detailed in the provincial auditor general's report.

"This is absolutely ridiculous," said Lane.

"Particularly given the fiscal situation our province is in, given the fact that our health-care system is in shambles, issues we have in our education system, cost of living issues and so on."

The first part of Denise Hanrahan's audit, released Thursday, found management of the Crown corporation — formerly responsible for Newfoundland and Labrador's overbudget Muskrat Falls hydroelectricity project — consistently overspent on employee perks and contractors in a five-year sample period. 

Hanrahan found lavish employee expenses, such as alcohol and tobacco, had been billed to taxpayers, including $8,000 on liquor and accumulated 272 bottles of various beverages at a convention centre in Churchill Falls. Between 2013 and 2018, Nalcor management also spent an average $240,000 per year on cash gifts, parties and golf fees for employees.

Lane said he wasn't surprised by the report's findings. Over the last six years, Lane — who has said he regrets voting in favour of the project while a member of the PC caucus — has lobbied four separate auditors general to look at Nalcor's spending.

That type of spending, Lane said, isn't acceptable for a publicly funded company, and blamed a lack of oversight at Nalcor.

"It was set up in such a way that allowed them free rein to basically operate at will, whatever way they wanted, with no accountability."

Embedded contractors a bigger issue: Lane

For Lane, what the report says about embedded contractors is a bigger issue than the spending details. The audit found Nalcor hired more than 500 contractors to fill long-term positions at inflated costs, instead of offering temporary employee positions at a significantly lower cost to the public.

"The fact that people, instead of being hired as employees, were hired as contractors and were just allowed to submit all of these expense claims and hours that they were administering themselves is an absolute conflict of interest," said Lane, who suspects the practice contributed to the cost overruns at Muskrat Falls.

"Those are matters that really should be looked at even deeper," Lane said.

Lane said Nalcor was exempt not only from some public tendering practices but also from provincial access-to-information legislation. Nalcor was also permitted to create their own Human Resources policies, which allowed the company to set its own salaries, bonuses and perks.

"We set ourselves up for a disaster, quite frankly. And I think that's what we've seen in this report. And to be honest with you, I thought it was going to be a lot worse."

Lane said the audit proves legislative changes are needed to ensure Newfoundland and Labrador Hydro and other Crown corporations do not operate with the same lack of accountability as Nalcor did.

"I think government needs to look at what's happened here now and they need to make changes." 

Energy Minister Andrew Parsons, also the MHA for Burgeo-La Poile, said he was "disgusted but not surprised" by the report.

"It's frustrating. It's unacceptable. It's taxpayers' dollars," he said.

Parsons said every financial decision the government makes now has been clouded by overspending that happened nearly a decade ago. He called the audit "another reminder of unchecked arrogance."

"When you look at the bigger picture, embedded contractors sitting there making a fortune and allowing side deals with companies, it's gross."

Since the five years covered by the audit, Parsons said, the provincial government has amended the Energy Corporation Act to require more accountability and transparency. He said it's unlikely such excessive spending will happen again, and noted Nalcor was folded into N.L. Hydro last year.

"We've brought in new leadership with Jennifer Williams, we changed the structure there. We've gotten rid of bonuses and their policies."

Williams, the CEO of N.L. Hydro, released a statement that distanced her leadership from the overspending identified in the audit.

"We welcome that scrutiny," said Williams, adding that many of the observations and recommendations on discretionary spending and conflict of interest have already been implemented."

However, Hanrahan's report also includes recommendations to create a clear policy on discretionary expenses and a more robust policy on hiring contractors. And while she says N.L. Hydro has accepted most of the recommendations, the company continues to offer employees perks that other Crown corporation workers don't get.

Williams said N.L. Hydro began to review and revise policies in 2019. Part of the process involved Nalcor being absolved into N.L. Hydro and making organizational changes to improve cost management.

As for the embedded contractors, Williams said the Lower Churchill Project has now been built, and all embedded contractors, except for a "handful" of transition contractors have since discontinued their work.

Lane said he's looking forward to the eventual release of the second part of Hanrahan's audit.

"If she says she's cleaning it up, I'll take her word on that," Lane said. "I encourage Ms. Williams to continue on with what she's doing."

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