New Brunswick

Atlantic Lottery Corp. blasted over lavish spending by auditors general

Atlantic Canada's four auditor generals have issued a blistering review of operations at the Atlantic Lottery Corporation, raising concerns about poor decision making, lavish spending, and instances of self regulation that at times became self serving.

4 Atlantic auditors general criticize poor decision making and lavish spending at ALC in new report

The Atlantic Lottery Corporation is being audited by the auditors general for all four Atlantic provinces. (CBC)

Atlantic Canada's four auditors general issued a blistering review of operations at the Atlantic Lottery Corp., raising concerns about poor decision making, lavish spending and instances of self regulation that at times became self serving.

  The auditors, including New Brunswick's Auditor General Kim MacPherson, raised concerns about large pay raises for two executive positions that came without the input or knowledge of the four provincial governments who own ALC, substantial travel and hospitality expenses that were paid without receipts, extravagant Christmas parties and other perks that were found to be "not appropriate."

  "For example, increases in executive compensation were made without shareholder consultation and have been significant," read the joint report which was released by the auditors simultaneously in each of the four Atlantic provinces.

"Also, in some cases, stakeholder relations, board and staff expenditures lacked due regard for economy." 

GeoSweep flop

On a failed investment in the game GeoSweep, that eventually cost New Brunswick and Prince Edward Island taxpayers $8 million, the four auditors found ALC executives used poor judgement and insufficient research in deciding to invest in the British company behind it 

Executives, anxious to see the investment proceed, also rushed the decision and withheld information from ALC' s board of directors on its shortcomings, according to the report

"Management did not fully disclose all relevant information and risks to the board," read the auditors report.

ALC's failed GeoSweep investment cost New Brunswick and P.E.I. taxpayers $8 million.
"The investment proposal included an estimated five-year return on investment of 510 per cent. Despite such a high projected return, which could be indicative of a high risk investment, the risk analyses prepared by management did not identify any high risks associated with this investment."

Only the provincial governments of P.E.I. and New Brunswick approved money to be used in the investment, all of which ALC eventually lost when GeoSweep flopped with consumers.

The report states ALC's board of directors have become much more active and independent in questioning management recommendations since the Geosweep failure.

"We found the board learned from this mistake and better exercised their oversight on subsequent major initiatives," read the audit.

Christmas parties and concert tickets

Concern was also expressed with the amount of money spent by ALC on Christmas parties, employee gifts, corporate dinners, undocumented expenses and "relations" with key government officials.

The auditors looked at $73,000 in concert and sporting tickets purchased by ALC and distributed to various parties for "stakeholder relations."

The expenditures included $14,000 spent on 125 tickets to the 2014 Cavendish Beach Music Festival and $48,000 on 300 tickets to the 2015 AC/DC concert in Moncton. 

The audit showed ALC spent $48,000 on 300 tickets to the 2015 AC/DC concert in Moncton. (@GeorgeLeBlanc/Twitter)
The audit stated 26 of the AC/DC tickets were given to senior government officials and elected officials from one of the provincial governments, which they declined to name.

Late Wednesday ALC confirmed the 26 AC/DC tickets all went to New Brunswick government officials, including 12 to then interim leader of the Progressive Conservative party Bruce Fitch, and 14 to a pair of aides working for then Liberal Finance Minister Roger Melanson.

A year earlier ALC said tickets to the Cavendish Beach Music Festival were provided to a variety of New Brunswick political figures including Premier David Alward, Finance Minister Blaine Higgs and Tourism Minister Trevor Holder.

"The corporation does not know whether tickets were actually used by the stakeholders who received them and cannot therefore demonstrate actual value for money," read the report.

"These expenditures by Atlantic Lottery, as currently administered, do not demonstrate an appropriate use of shareholder money." 

Also "not appropriate' was $111,000 spent on corporate Christmas parties between April 2013 and August 2015, according to the report.

Travel without receipt

On corporate travel and entertainment expenses the auditors reviewed 59 expense claims totalling $335,000 and found 17 of those lacked proper receipts.

Auditor General Kim MacPherson is one of the four auditors general who authoured the audit of ALC. (CBC)
In addition, 38 claims did not have an adequate description of the "rationale or support for the expense" and 14 claims were not properly approved, often with people approving their own claims.

"A number of these expenses were instances of an individual booking a flight for their supervisor on a corporate credit card. The monthly corporate card expenditures had been approved by the supervisor, meaning the supervisor effectively approved his or her own expense," read the report.

The auditors made several recommendations to fix problems they identified, most of which ALC says it has accepted.

In Moncton ALC's President Brent Scrimshaw did not dispute any of the audit's findings and pledged to fix all of the problems revealed.

"As the CEO I take full responsibility for the auditors findings," said Scrimshaw. 

"We have accepted all of the audit recommendations and as a result we will be that better company."

Scrimshaw said one change ALC is considering is ending the practice of providing gifts, like concert tickets, to politicians. "That's being revisited for sure," he said

ABOUT THE AUTHOR

Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

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