A government audit of a Vancouver-based technology-marketing agency found a number of serious concerns just months before the province shut it down.

The audit report for Leading Edge BC, a copy of which was obtained last week by the Georgia Straight under a freedom-of-information request, pointed to concerns with high salaries paid to staff, the way work was contracted out, staff expenses, and seemingly sloppy record-keeping practices.

Although Premier Gordon Campbell, in a December 9, 2003, news release, promised $8.3 million in funding for three years, the government has halted that funding and last month quietly announced on Leading Edge's Web site that it was absorbing its functions into the Economic Development Ministry.

Despite the 2003 promise of taxpayer money until December 2006, Economic Development Minister Colin Hansen told the Straight in a July 4 phone interview that the government needed to decide now whether or not to renew Leading Edge's funding. Since Leading Edge was established, Hansen said, the ministry has developed its own strong marketing initiative. “Leading Edge made sense back in 2003 when we set it up,” he said.

Hansen denied that the end of the organization was a result of the February 6, 2006, Finance Ministry audit branch report. However, he said his ministry acted quickly on some recommendations. “We were concerned, and the deputy minister at the time took some pretty immediate action.”

Cindy Pearson, vice-president of the Vancouver-based B.C. Technology Industries Association, is among those surprised by the B.C. government's decision to shut down Leading Edge BC and move its operations into Economic Development.

“No advance notice with this one so, I guess, yes, it was a bit of a surprise,” Pearson told the Straight. “We're looking forward to the ministry picking up some of the good work that LEBC did do.”

The province established Leading Edge BC (formally known as the Market Technology Society) in September 2003 in partnership with industry to market B.C.'s high-tech sector.

The audit branch report found a number of concerns with Leading Edge BC. The report refers to Leading Edge as the “society”.

Among the concerns were the salaries paid to its staff. Although the salary figures were deleted from the copy provided to the Straight””on the grounds that revealing them would harm personal privacy””the report says that the salary of Leading Edge's president was “high by public sector standards”. “As the society is nearly entirely publicly funded, where salaries are not in line with the public sector it could lead to the perception that the society's management is being excessively compensated.”

However, even though Leading Edge got most of its funding from taxpayers, it was not subject to the Public Sector Employers Act and was free to compensate staff at whatever level it decided, the report said. “In our opinion, compensation packages for all senior staff should be approved by the [society's] board, or a committee of the board, as ultimately the funding for the society are public funds,” the report noted.

The auditors were unable to assess Leading Edge's hiring practices. According to the report, Leading Edge did not retain staff résumés and evaluations. “We were advised that this was due to personal privacy concerns,” the report related. “In our opinion, the society likely has sufficient resources to ensure that personal records are held securely and we would recommend that résumés and evaluations of staff are held in personnel files.”

Also reported was that Leading Edge had no conflict-of-interest policy, although the agency's board of directors was developing guidelines at the time of the audit.

The report drew attention to one project. The president of Leading Edge approved spending about $380,000 in Leading Edge funds on a research project conducted by another organization, the B.C. Technology Industries Association. However, until May 2005, the Leading Edge president was also president of the association.

“As of May, 2005, the president is no longer employed by BCTIA and he did not personally benefit as a result of this transaction,” the report said. But it went on to recommend that the president “should not be considered as a [Leading Edge] board member with voting rights”.

Leading Edge had no controls to ensure that its contracting policy was adhered to, according to the report, which noted that the policy was not consistently applied.

“For example, the society expended approximately $230,000 with a communications organization in 2004–05, for public relations, advertising and creative and technical writing for a number of small projects,” it said. But there was no competition for the work and there was no contract, according to the audit.

Another issue concerned expenses.

The president of Leading Edge was reimbursed for his expenses up to a limit, the report said. (The size of the limit was deleted from the Straight's copy.) “There are no guidelines on this although the president indicated that he understood this to mean business-related entertainment and travel.”