Ontario's provincial Auditor General, Jim McCarter, released his 21 page report this morning which has questioned the integrity of the executives behind the OLGC.

(See link to the full report after the article.)

The report not only showed unnecessary purchases made by some of the top executives in the company, but disclosed how millions of tax payers' dollars were being used for parties, cars, trips to the spa and even hiring party planners.

The investigation began on August 31, 2009 when the Minister of Finance made a request that the Auditor of General for Ontario investigate and review the Ontario Lottery and Gaming Corporation under Section 17 of the Auditor General Act.

The Minister requested that all findings under the investigation be made public and would include "a review of the employee expense practices with respect to the Ontario Lottery and Gaming Corporation, including the approvals process, and whether such expenses were incurred in accordance with established policies." The report covered OLG's senior executives, who have since been dismissed or have resigned from their roles within the OLGC and the board of directors.

Today's report disclosed expenses for travel, business meetings and hospitality incurred by the Ontario Lottery Gaming Corporation based on Ministry guidelines and compared many of them to expenses of the Federal Government and private companies.

While the expenses claimed for accommodations by OLGC executives was on par with the ministry guidelines, the receipts did lack detail and were vague at best. There were also charges for hotels that were slightly above the OLG negotiated rates.

Additionally, McCarter's report shows that 20% of the claims made weren't itemized and more than 10% did not include a list of attendees which is required by policy. Most of the claims for accommodations were approved without any written explanations or specific details as to what the expense was for.

Employee meetings could have been more cost effective, suggested the report, had the OLG execs held meetings in-house instead of opting for lavish lunches at pricey restaurants. In fact, the report shows that approximately $1 million was spent during the 08/09 fiscal year for both hospitality and employee meetings. Unfortunately an exact figure between the two wasn't available since the OLG didn't keep track of which expense was for hospitality and which was for employees.

A few points raised in McCarter's report included spending for corporate and divisional meetings, hospitality and executive vehicles. According to the report, the OLG spent more than $1 million on corporate and divisional events, including a conference in 2009 for 250 senior employees that cost a whopping $551,000. In addition to this, the report shows spending for spa retreats, gatherings at resorts, boat cruise and more than $100,000 spent on sporting events to rent whereby the OLG would rent sky boxes for certain retailers.

An astonishing blow to the investigation came from the vehicle expenses. The OLG leased "an executive fleet" of vehicles for 26 senior members which amounted to $17,000 to $24,000 per year. Another 16 senior employees were offered the vehicle package but instead declined and took an allowance. When questioned about the vehicles, the OLG said this was part of the company's "executive compensation package" which when compared to the packages provided to Minster cabinets is significantly higher.

While the OLG expects its employees to be prudent in their spending, McCarter's report clearly shows the opposite. Receipts for a conference held in Toronto during 2009 showed 40 of the 90 employees reserved a room at Toronto hotel even though they lived in the GTA. The OLG did eventually cancel the reservations but still had to pay the $3,900 cancellation fee for 22 of the 90 reservations that failed to cancel within the respected timeframe.

OLGC Expense Practices Report Suggestions

The report followed up with some suggestions and recommendations for the OLG including;

• Work with its responsible ministry to develop an effective accountability framework that includes clear expectations and periodic reporting;
• Where the current employee expense policy is silent on certain types of expenditures, develop guidelines to provide the necessary guidance to employees;
• Reinforce and communicate the need for a culture of prudent employee expense practices to staff through training and leadership commitment;
• In periodic internal audits include an assessment of whether departmental managers have properly approved employee expense claims; and
• Through the new board of directors, review its employee meeting and conference arrangements, employee rewards and recognition programs, and entitlement to executive vehicles in the context of OLG executive compensation arrangements.

There was a lack of a prudent mindset," McCarter said, "A group of employees would get together and have a meeting, and rather than, say, ordering in a couple of sandwiches or paying for their own lunch, they'd go downstairs and have a fairly expensive meal at a restaurant.

McCarter said expense claims for meals, taxis and parking were regularly approved without supporting documentation. One in five expense claims lacked itemized bills. One in 10 meal expenses didn't list attendees.

What we tried to say to them is, at the end of the day, you really need a culture that recognizes you are in a quasi-public-sector environment.

The OLG began to implement changes within the different areas McCarter expressed concern about while the investigation was underway, including the rewards programs offered to employees and the purchase of tickets to professional sporting events, among others, and will be implementing additional changes.