Ontario auditor blasts former government’s administration and monitoring of S&T programs

Lack of cooperation cited

A scathing auditor’s report has revealed that Ontario’s previous Progressive Conservative government offloaded a huge portion of its S&T spending to a quasi-private sector organization but received virtually no information on whether the public funding was being properly spent. The finding was among a series of damning revelations detailed in the 2003 report of the Ontario auditor, whose work was marred by lack of cooperation and missing documents.

The auditor’s office found that the Ministry of Enterprise, Opportunity and Innovation (MEOI) —since renamed Ministry of Economic Development and Trade – MEDT — was entrusted with $4.3 billion but had no strategic plan to guide its use or measure its effectiveness.

The report was publicly released earlier this month, but a preliminary draft was released early last summer to the Ministry. It covered six programs within MEOI’s S&T division (see chart) accounting for 90% of the division’s expenditures and examined some aspects of other programs.

The auditor examined MEOI’s programs to gauge governance and accountability, project selection, program monitoring, monitoring potential conflicts of interest, project benefits, program administration and measuring and reporting on program effectiveness. In all categories, the programs were found lacking to some degree.

AUDITOR ZEROES IN ON ARM’S LENGTH ORGANIZATIONS

The harshest language was reserved for the Ontario Innovation Trust (OIT). It found that the OIT was created in March/99 without a business case “contrary to government directives on alternative service delivery”. Once established, administration of the Ontario Research and Development Challenge Fund was transferred. MEOI committed more than $1 billion to the OIT which also administered several new programs as they were created.

In April/00, the Innovation Institute of Ontario was created as a subsidiary of the OIT to handle a wide variety of administrative, financial and communications services. Both organizations are headed by Ken Knox, former DM of MEOI (then known as Ministry of Energy, Science and Technology) until early 2000. At the time, officials said the creation of the arm’s length organizations was intended provide universities and research institutions with a more efficient, one-stop bureaucracy to deal with when seeking funding.

The report does not suggest that there was any impropriety involved within the Ministry or the OIT. Nor does it contend that the money allocated to S&T was not well spent. Its central thrust is that there simply isn’t enough information to draw any conclusions, due to ineffectual or non-existent reporting and accountability mechanisms.

A case in point is the monitoring of potential conflicts of interest. While the Ministry is responsible for monitoring potential conflicts involving current and former employees, the auditor found that MEOI had no procedures in place. It also concluded that the “Ministry did not have sufficient information to determine whether all conflicts had been appropriately declared”.

Government sources and those familiar with the S&T division say the auditor’s report merely captures what’s been known internally for years. One official contends that the OIT was created quickly and without Ministry staff input. He says that the auditor’s report is welcome as it may trigger action to counter a litany of negative perceptions and rumours.

An observer of provincial S&T says the report’s findings were not surprising given the remoteness of the S&T division within the ministry. He contends that the Ministry simply doesn’t have the staff to properly liaise with, or require accountability from, arm’s length organizations.

“You have contracts between the Ministry and the Challenge Fund, OIT and IIO. Then you have others controlled within the Ministry. I’ve always thought, one or the other would work better,” he says. “I was surprised by the intensity of the comments (in the report). I don’t think I’ve ever read such forthright comments in an auditor’s report, and I’ve read a few.”

The majority of the auditor’s criticisms involve mandated paper trails which are necessary for any bureaucracy to accurately assess its performance. Where there was insufficient materials to properly evaluate program effectiveness and value for money, the auditor’s criticisms appear warranted. In many cases, documents such as annual reports were months or years late.

A consultant’s report was apparently prepared for the OIT on best practices in accountability. But the auditor was unable to secure a copy or determine whether the report was ever completed.

Lack of paperwork also hampered the auditor’s ability to determine whether the CF was being monitored properly. The OIT did not retain panel reviewers’ assessments of research proposals, making assessment of proper monitoring procedures impossible.

In the area of effectiveness reporting, the auditor afforded a rare if backhanded expression of praise to the Ontario Centres of Excellence (OCE) program. The OCE was singled out for having the “most comprehensive performance measurement and reporting system”. It noted, however, that the OCE’s performance and reporting was difficult to qualify since the Ministry “has not established targets or benchmarks”. Specific OCE’s were also guilty of failing to submit annual reports on time.

Ministry responses to the auditor’s findings were included in the public report and staff has been busy beginning the process of addressing the auditor’s concerns. But that process will likely be superceded by the new government’s decision to order a comprehensive review of MEDT operations.

“The Ministry will be putting all programs – whether they are within the ministry or arm’s length, under a comprehensive review,” says Lisa Roberts, a senior communications planner at MEDT. “There was concern with the language in the auditor’s report ... We will address every single point raised.”

Roberts did not know whether it will be business as usual with MEDT’s S&T programs and no other Ministry officials were available for comment. Officials from both the OIT and Challenge Fund either did not return calls or referred all questions to MEDT.

NEW GOVERNMENT RESPONDS

The report has prompted the new Liberal government to introduce amendments to the Audit Act, strengthening the provincial auditor’s office and giving it expanded powers to conduct value-for-money audits. The report can be found at: www.auditor.on.ca.

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