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Thursday, December 12, 2013

Unpacking the Auditor General's ONTC Report

I have now read the newly-released Ontario Auditor General's report into the divestment of the ONTC. The full report can be accessed here. While much of the report deals with numbers (many of which have been grabbing the headlines), it also sheds valuable light onto the divestment process as a whole. While the Auditor General (AG) is an impartial body, the government is accused of poor planning and communication, which calls the validity of the divestment into question. Given the revelations, it is hard not to criticise the government.

The media has latched onto the two key numbers from the report: the government's initial claim of a $265.9 million saving over three years and the projected $820 million cost calculated by the AG. The initial savings claim, which was released as part of the information on March 23, 2012 when divestment was announced, is seen as incomplete and ambiguous. The figure does not consider potential liabilities, such as severance and environmental cleanup and it was not clearly defined in the government announcement, leading to different interpretations and confusion. The projected costs have been rising steadily since March 2012 and are now estimated to exceed $820 million excluding environmental cleanup, Aboriginal negotiations and other costs deemed too "sensitive" to publish. Despite the high costs, the AG does conclude that divestment may still lead to cost-savings in the long term, especially if the alternative is to continue the ONTC in its current form.

Of greater interest to me was the analysis of divestment, a process which the government has clearly screwed-up spectacularly. Interestingly, the AG contextualises the divestment as a continuation of every financial decision surrounding the ONTC since Mike Harris' failed divestment plan in 2000. The current divestment was announced on March 23, 2012, less than 24 hours after much of the process was implemented. In fact, the President of the ONTC was only notified once much of the restructuring had already happened. The report details a culture of mistrust and poor communication between the Ministry of Northern Development and Mines and the ONTC, two groups which it appears could not understand each other. The ONTC was seen as a politically-sensitive issue, so any attempts to restructure it were blocked to avoid conflict. As a result, the financial problems at the ONTC continued to get worse as losses continued without any apparent solution. This poor working relationship has been exacerbated by the government's de-facto ban on the ONTC seeking new business and the continued lack of consultation of the ONTC about its own future.

The most damning revelation in the report is the government's complete lack of due diligence on the issue. Investigations into the potential cost of divestment, pension and severance liabilities were only begun after divestment was announced in the first place. The government had never tried to divest something as large as the ONTC and was clearly stumbling around in the dark trying to make a complex reality fit their goal of cost savings. The highest cost, liabilities as a result of the ONTC's  collective agreements (which cover 90% of employees) was not even considered until well after the divestment was announced.

This report offers startling new information into what has happened over the past two years and how much of a mess the government has made. That said, it is also important to draw a line between the McGuinty era and the Wynne era. While McGuinty's tenure was marked by closed-door decisions (which the report suggests were short-sighted and unwise), Wynne's government has made the process more transparent, notably by creating the Minister's Advisory Committee and backing away from complete divestment. While it is unclear how much of this change was provoked by the revelations in the AG's report, what matters is that there has been change. The contents of the report show irresponsible government practices and decisions, but this also offers a chance to change the situation for the better. Now is a chance to open up discussion, be more transparent, recognise the needs of northern Ontario and of responsible fiscal policy while actually helping the ONTC to adapt to a changing world. This should not be a partisan or a political issue. The core of the ONTC has always been service to people and to Ontario. This must not be forgotten.

This is my take on the report. I encourage you to read the report for yourself and draw your own conclusions as well. There is a comprehensive article in the Timmins Press which outlines some high-profile reactions to the report.

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