Nalcor employees bought booze, cigars on public dime, auditor general finds

An audit of the Crown corporation formerly responsible for Newfoundland and Labrador's overbudget Muskrat Falls hydroelectricity project has found management consistently overspent on employee perks and contractors in a five-year sample period.

Nalcor, which was formed in 2007 and was folded into N.L. Hydro last year, "did not always ensure the best possible use of public money," found Thursday's report from Newfoundland and Labrador's auditor general, Denise Hanrahan.

"This was a long and complex audit," she said to reporters at a news conference Thursday.

Hanrahan found lavish employee expenses,such as alcohol and tobacco, had been billed to taxpayers. She foundstaff spent $8,000 onbooze and accumulated 272 bottles of various beverages ata convention centre in Churchill Falls.

In 2017, staff also overspent on Christmas dinner, exceeding the $10,000 budget once over.

Between 2013 and 2018, Nalcor management also spent some $240,000 per year on average on cash gifts, parties and golf fees for employees.

The Crown corporation also lacked any policy governing relocation or hospitality fees. In one case, the audit found Nalcor had paid $50,000 toward one employee's moving costs, which included shipping fees for the employee's hot tub and six recreational vehicles.

Contractor policy questioned

Nalcoralso regularly hired contractors to fill long-term positions at inflated costs, without rationale or any evidence of weighing the costs and benefits of doing so, the audit found. That meant Nalcor wasn't forced to do any math to determine whether contracting out some positions would be cheaper in the long run.

Hanrahan's report found more than 500 of 778 employees were contracted for over two years and embedded in management, rather than offered temporary employee positions "at a significantly lesser cost" to the public.

Nalcor was exempted by an order in council in 2010 from having to adhere to government spending policy and was allowed to craft its own. Hanrahan said that policy didn't exist in some cases.

She found no conflict of interest involving former Nalcor CEO Stan Marshall, but did find some perceived conflict of interest involving some of the contractors. For instance, two of 13 employees in one sample were found to have returned to work as contractors after their employment ended without approval from Marshall.

Hanrahan's report includes recommendations to create a clear policy on discretionary expensesand a more robust policy on hiring contractors. She said N.L. Hydro has accepted most of those recommendations, but continues to offer employees perks that other Crown corporation workers don't get.

She told reporters Thursday that due to the office's reliance on auditing samples, she wasn't able to offer an estimate of the total avoidable costs incurred by Nalcor.

"There is a lot of trust in our public organizations," she said, "and we need to make sure that that trust and accountability is maintained."

Nalcor was the subject of a lengthy inquiry finalized in 2020, which found Nalcor management"frequently took unprincipled steps" to secure approval of the $12.7-billion Muskrat Falls project.

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