Two provincial ministries have handed out large sums of money to a host of companies, nonprofits, and the University of Victoria in violation of the government's own rules, according to an audit by the Finance Ministry.

The Georgia Straight obtained a copy of the audit, which was completed on September 23, 2005, through a freedom-of-information request. It covers financial agreements made during the 2003–04 financial year between outside firms or agencies and the Small Business and Economic Development and Energy and Mines ministries, as they were then known.

The ministries took part in three types of financial arrangements: contracts, “contribution agreements”, and grants. The total value of the 1,466 arrangements—of all three types—entered into in that year was $53,014,863. After sampling 26 such arrangements, worth more than $5 million, the auditors discovered that a majority were in violation of the government's rules for distributing public funds.

“We found significant risks in all areas of contract, contribution agreement, and grant management,” the report says. “Most of the files we reviewed did not contain sufficient documentation to adequately assess the administration of the contract, contribution agreement, or grant, particularly with respect to planning and monitoring practices.”

CONTRACTS Of the 18 contracts reviewed by the auditors, with a total value of $707,595, just one complied with the government's core policy and procedures manual, and the ministries' contract administration manual.

Thirteen of the 18 contract files contained no planning documents, such as a cost-benefit analysis, or cost estimates of in-house versus external contracting. As the auditors put it: “There is a risk that funds will not be used effectively, efficiently, or economically without a project plan.”

Seven of the contracts specified no measurable outcomes, according to the audit. “Deliverables that are not specific enough may result in poor or non-performance by the contractor,” the report notes.

Five contracts used the wrong solicitation method, the report says, including some that were handed out without putting them out to tender—so-called direct awards. “The ministries should ensure that direct awards are used only in exceptional conditions as defined in the core policy and procedures manual,” the auditors write.

The most common error in contracts was that they omitted information about the use of subcontractors and about insurance. “Completed forms help to ensure that high-risk areas, such as inadequate insurance coverage or unauthorized use of subcontractors, have been considered in awarding contracts,” the report says.

Eleven of the contracts involved work beginning without a properly signed agreement. “This practice exposes the ministries to considerable risk where verbal commitments have been made in the absence of a signed contract,” the auditors report.

One film company was paid $10,000 by the Small Business and Economic Development Ministry to “provide technical maintenance and support for the digital library”, according to the audit. “The contract was signed on November 20, 2003 but the work began on November 7, 2003,” the report says.

CONTRIBUTION AGREEMENTS Tourism B.C. received a $750,000 direct award from the same ministry via a contribution agreement that also broke several rules for such arrangements, the auditors say. “There was no cost-benefit evidenced in the file.” As well, the agreement was “paid in full before the work was performed”.

“We found little documentation to support this agreement. Accounting of all expenditures was not evidenced in the file. There was no evidence of planning or monitoring.”

Despite this, the auditors found that Tourism BC was managing the agreement in accordance with the ministry's guidelines.

GRANTS According to the province's public accounts, in 2003–04 the University of Victoria received a total of $140 million in grants from the B.C. government, including $542,000 from the Energy and Mines Ministry.

But not all of those grants followed the province's rules, according to the audit. Two years ago, the ministry gave UVic two grants, of $24,000 and $25,000, respectively, to supply two co-op students. “This contravenes policy,” says the audit. “For grants to organizations, the ministry must not receive a direct benefit.”

Instead, it says, the students—one of whom was later hired by the ministry—should have been originally accepted for their co-op term in accordance with the government's contract with the B.C. Government and Service Employees' Union.

There were other problems with the grants. For instance, the province requires a cost-benefit analysis before handing out grants. Yet the auditors found no evidence of such an analysis for the UVic grants.

In addition, the grants were not approved by the deputy minister, as required by the government's contract administration manual.

The auditors sum up the UVic grants' compliance with government policy as “poor”.