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Tuesday 23 May 2017


Some critics of the Muskrat Falls project, including this scribe, had hoped that the Auditor-General (A-G) might review the activities of Nalcor several years ago. Confronted directly on the issue, during a presentation on the province’s fiscal position at Memorial, the A-G excused his Office based upon a limited budget and a shortage of resources.

Then in November, 2016 Terry Paddon – with no evident change in those resources - suddenly got energized. He told the media he now planned “to take a look at Nalcor Energy (and) possibly Muskrat Falls."

The focus of the A-G has to be sharp and precise. In this instance to investigate the allegations of estimate falsification of Muskrat Falls.

In its Mission Statement the A-G’s Office states:

"As legislative auditors, we audit financial statements and other accountability documents, evaluate management practices and control systems, and determine compliance with legislative and other authorities.

Our purpose is to promote accountability and encourage positive change in the stewardship, management and use of public resources".

Contrary to the stated “Mission” there has not been any response from the Office of the A-G on anything.
Auditor General, Terry Paddon
There is nothing wrong with the stated role of the A-G’s Office.  It’s just that a megaproject is not in its league.

Bear in mind that it took the A-G nearly five months after Nalcor CEO hiked the project costs to $11.4 billion - and termed it a “boondoggle” – before he showed any interest.

In addition, a former senior Nalcor engineer – through this Blog and the CBC – levelled some of the most egregious allegations ever directed towards any arm of the Government - including deception and falsification of project and budget estimates.

In response, there has not been a peep from the A-G’s Office. Not even in consequence of CEO Stan Marshall having kicked responsibility for these activities to the camp of a very narrow senior group.

If not the A-G, on what institution is the public supposed to depend?

The A-G ought to have noticed that the government, through Minister Siobhan Coady, ‘used’ him and his undefined plan to “look” at Nalcor as a means of delaying consideration of a forensic audit of the Muskrat Falls’ estimates.   

In a sensible world – one where integrity in government is paramount – the A-G would step up by making it impossible for Premier Ball to engage in pretense – simply by telling the public how his plans have matured since taking on the Nalcor file.

A skilful A-G would tell the Premier that he need not worry – that he (the A-G) intends to pursue a forensic audit.

Recent comments to this scribe by the former Nalcor engineer give further clarification to why the A-G ought to disclose his position. Said the anonymous engineer:

A forensic audit is orders of magnitude more complex than a commercial audit that most people are familiar with. To perform an forensic audit the group has to have a very high skill level in high tech tools such as - mathematical methods and simulations, large databases of unit prices by location, productivity statistics, familiarity with logistics, construction methods, indirect costs and a whole host of other attributes.

It will be extremely unlikely that the AG's team will have such skills.

Much of the problems at Muskrat Falls is due to the senior Management not having a clue. Stan Marshall himself has said so in Anthony Germain's interview with the Nalcor CEO. The AG's report cannot, and must never be, the basis for a decision on the forensic audit.

What could be clearer?

A good starting point for the forensic audit will be the statements made by the Nalcor CEO in his interview with the CBC  This gives a very sharp and undiluted focus.

Comments by Stan Marshall – CBC Interview

Indeed, the anonymous engineer (AE) was good enough to make the following comments (shown in red below) in response to Stan Marshall’s (SM) comments to CBC’s Anthony Germain:

SM: Initial cost projections were "generally way too low"...

AE: Then find out who made them and who approved them. This is very easy to do. Check the Project Approval Documentation.

SM: "I don't think the thing ever would have been built at the estimates they had given at the time. They were just unrealistic." 

AE: This statement implies that the estimates were deliberately understated due to a policy decision made by Nalcor to secure project approval.

SM: I don’t know who was responsible.

AE: Just see whose signature is there on the “Authorization to Proceed” documentation.

AM: Whether they came from my predecessor, whether they came from the Confederation Building, I have no idea…don't know who made the ultimate decisions before my time"

AE: Once again check the signatures on the “Authorization to Proceed” documentation.

CBC: As for the current $11.7-billion estimate for Muskrat Falls, Stan Marshall says that number is solid.

AE: No. This is incorrect. The $ 11.7 billion comes from the EY Interim Report dated April 2016. The final report is not out yet – one year later. This is most unusual. Cost increases will be inevitable.

In conclusion, there is absolutely no reason why the A-G cannot or would not conduct a forensic audit. The “Mission Statement” requires him to do so. Now, all he has to do is hire the requisite skills.

Indeed, anything short of a full forensic audit will be a serious dereliction of duty.