Province writes off millions in loans without cabinet approval

P.E.I.'s Auditor General Jane MacAdam is raising concerns about the way provincial Crown corporations write off and cancel loans.

Lending by the province has nearly doubled in the past decade

Auditor General Jane MacAdam says authorization by cabinet provides a public document and, therefore, transparancy. (CBC)

P.E.I.'s Auditor General Jane MacAdam is raising concerns about the way provincial Crown corporations write off and cancel loans.

She says, while the presiding legislation hasn't changed over the past decade, practice has, to the point where Crown corporations such as Finance PEI no longer seek cabinet approval when they write off or cancel a loan.

MacAdam says cabinet authorization provides a public document, which in the past, "resulted in a high level of transparency as the amounts and the names of the businesses and individuals were publicly available."

In her 2015 report, released Tuesday, MacAdam points out the last time a government lending agency went to cabinet to approve a loan writeoff was in 2006-2007. Her report looks at both writeoffs and cancellations of loans.

Innovation Minister Allan Roach says the auditor general's interpretation is different from the legal opinion sought by the previous and current governments.
Writeoffs are used to remove the amount owing from the province's books, but still leave the borrower legally obliged to pay. Loan cancellations remove the obligation to pay.

MacAdam found that since Finance PEI was created as the province's primary lending agency in April 2012, it has written off more than $6.5 million in loans. In 2013-2014, the board of directors of Finance PEI also authorized loan cancellations totalling $3.7 million.

MacAdam says the board of Finance PEI, formerly the P.E.I. Lending Agency, was given authority to write off loans back in 1999-2000, although the agency continued to seek cabinet approval on at least some loans up until 2006-2007.

The auditor general says no specific delegation of authority has been enacted to allow Finance PEI to cancel debt.

Different interpretations: Roach

However, she said, "management of Finance PEI and [Island Investment Development Inc.] have interpreted their legislation ... to mean that both corporations can authorize the cancellation of debt from a third party" without cabinet approval, a practice she says continues into 2014-2015.

In her report, MacAdam shows an overall decline in reporting starting at least as far back as 2002, when the names of individual debtors were still included in orders-in-council. After that, only lump-sum approvals without names were published.

Finance Minister Wade MacLauchlan says the province will clarify authorization requirements for writeoffs and cancellations. (CBC)
By 2006-2007, even those had stopped.

"I think what we have is we have interpretations," said Innovation Minister Allan Roach in response to the report.

"The auditor general's interpretation is different from the legal opinion that was sought by the Conservative government previously, and by this government. So, you know, we're quite happy to sit down with the auditor general to review the recommendations."

Requiring Crown corporations to receive cabinet approval for writeoffs and cancellations "results in a publicly available record which promotes transparency and accountability," MacAdam said in her report.

"The Auditor General wants to ensure that members of the Legislative Assembly and Islanders are aware that reporting under the Audit Act does not provide disclosure of all amounts due to the province that were written off or cancelled."

The auditor general is asking Finance Minister Wade MacLauchlan to clarify authorization requirements for writeoffs and cancellations of amounts owing to the province.

"That's a policy that's been in place since 2005, to have a certain amount under which, dealing with loans isn't brought to cabinet," said MacLauchlan on Wednesday.

"But I think there's room to take a look at that in light of the auditor general's review and recommendations, and we'll be working with officials to see if there's any further policy that's in order in light of her commentary."

The report also noted overall lending by the province has nearly doubled in the past decade, with total loans in 2013-2014 reaching $443 million, compared with $228 million in 2004-2005.


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