David Stonehouse
The Ottawa Citizen
David Stonehouse
The Ottawa Citizen
Auditors delving into job creation grants warned Human Resources Development more than two years ago that the Transitional Jobs Fund was "political," job figures were inflated, and some rules were skirted to get projects approved.
And they found that a $6-million grant for planting and thinning tree lots in New Brunswick -- one of the largest single handouts from the $300-million fund -- did not even fit within the rules.
Their 40-page audit also alerted the department to a number of problems revealed in the latest review of grant files that sparked the Shovelgate scandal plaguing the Chretien Liberals: weak financial guidelines, inexperienced staff and poor tracking of projects.
The damning audit by Consulting and Audit Canada, a federal agency, talks explicitly about political interference in the awarding of the grants.
"Pressures on the staff to expedite the approval process have come from the political level and commitments have been made that HRDC staff must then follow," says the 1997 audit, which examined 25 projects in Atlantic Canada and Quebec bankrolled by the fund.
It does not divulge any details about political involvement or chronicle why "some of the more problematic projects did not go through the established approval process."
No one with the agency, an arm of Public Works Canada, was available to discuss the audit yesterday. Public Works spokeswoman Fran Gershberg referred inquiries to Human Resources, but a spokesman there was not returning phone calls yesterday afternoon.
The audit is sure to fuel the jobs controversy that has ensnared Human Resources Minister Jane Stewart, who has been on the defensive for weeks as opposition politicians cry for her resignation over the mishandling of nearly $1-billion in grants and contributions from her department.
She has always insisted there was never any political interference in the way the money has been handed out and that the job creation programs are creating badly needed employment.
The audit, though, says staff administering the Transitional Jobs Fund find themselves under "strain" because it is "more political than other programming."
The audit's assessment of the $6-million forestry spending in New Brunswick, announced in 1996, was blunt: Not only should it not even have been approved, but the government's estimates of job creation were inflated.
"The silviculture project does not meet the criteria for TJF funding. Silviculture projects do not meet the TJF principles of creating sustainable employment," the audit says.
A government document shows the money was meant to fuel the creation of 500 jobs throughout New Brunswick over three years. But the audit said they were short-term jobs that distorted job figures and lowered cost-per-job calculations.
And it found the other New Brunswick projects it scrutinized were no better at creating lasting jobs, the very purpose of the fund.
"Counting these jobs as year-round jobs distorts the TJF job creation results," it said.
"A significant portion of the employment created in New Brunswick is new seasonal work or the extension of existing seasonal jobs. Seasonal job creation ranged from extending seasonal jobs by six weeks to creating jobs of 10 months' duration. Some of the jobs are also part-time," it said.
"To illustrate with one example, one project created three full-time jobs and extended the permanent seasonal jobs of 43 other existing workers from 20 weeks to 26 weeks. This was counted as 46 jobs created. This approach inflates the number of jobs created and deflates the cost per job."
The silviculture project was announced in northern New Brunswick in the summer of 1996 by then-Human Resources Minister Doug Young, the province's political heavyweight at the time. The province, under then-Liberal premier Frank McKenna, pitched in another $10 million.
The money went to thousands of private woodlot owners to plant trees, thin woodlots or draw up forest management plans. A spokesman for the provincial Natural Resources department said forestry giants like Irving or Repap were not eligible.
The announcement was made eight months before Mr. Chretien called the 1997 federal election. Going into the vote, the Liberals had a stranglehold on the province, holding nine of its 10 seats. Reigning Grits included Fernand Robichaud, now a senator, and former Solicitor General Andy Scott.
But the vote turned out to be devastating for the party, which was chased from the region after years of government cutbacks that hit the region hard. Five Tories and two New Democrats were elected in the rout.
Mr. Young was defeated in the face of voter rage in his Acadie-Bathurst riding over employment insurance reforms. Ironically, the Liberals set up the Transitional Jobs Fund as a way of softening the blow delivered by the changes.
The audit also found that staff handling the fund were stressed, not adequately trained for the demands of the job and concerned that there weren't enough rules on how to administer the fund or handle the finances.
"In some regions, HRDC staff expressed a need for procedural and financial guidelines, particularly to clarify some of uncertainties surrounding financial recourse. Monitoring requirements for TJF projects also need to be addressed."
Despite the warning, little appeared to have been done to fix those problems.
The audit released by Ms. Stewart last month found there little or no evidence among 459 files examined that there was financial monitoring or even checks to see if the projects were creating jobs. Essential documents were missing and supervision was lacking, it found.
The Consulting and Audit Canada review was not the first to reveal monitoring problems in the department.
In 1991, an internal audit found that controls were so inadequate that the department was vulnerable to "possible misuse of public funds." Another review in 1994 warned Human Resources it was still neglecting to put proper safeguards in place.