This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.
In its 2010 annual report, the Ontario Auditor General found significant flaws in how the provincial government approved its funding for stimulus spending projects. The report noted that the province failed to allocate adequate time and staff resources to the approval of thousands of funding requests and that it failed to properly prioritize those requests. The Auditor General also found that the government failed to document the rationale behind funding approval decisions and that this lack of transparency undermined the ability to properly protect against the politicization of the spending decisions.
The Auditor General’s report reviewed three separate programs that administered $3.9 billion in federal-provincial stimulus spending. The report raised significant concerns over the volume of funding applications received from municipalities and the time constraints under which the Ministry of Energy and Infrastructure (referred to as below as MEI) approved those applications:
With respect to the grant-application and application-assessment processes, we noted that:
-
MEI placed no limit on the number of applications that municipalities with populations of more than 100,000 could submit under ISF, the largest of the three infrastructure programs. This provided an incentive to submit large numbers of applications in hopes of getting as many of them approved as possible. For example, four municipalities submitted a total of almost 1,100 applications, accounting for 40% of the applications submitted by the 421 Ontario municipalities for this program.
-
Due to the tight deadlines, the time allotted for the provincial review of ISF applications was in most cases just one to two days. In one instance, we noted that a key component of the provincial review for 56 projects worth an estimated $585 million was carried out in just four hours. In our view, it would not have been possible to conduct the necessary review work within such a tight time frame.
-
Applicants were not required to prioritize their infrastructure needs, and none did in their applications, making it more difficult to assess the benefits of the proposed projects and make informed funding decisions. One municipality submitted 150 applications valued at $408 million, and received approvals for 15 projects worth $194 million. From our visit to this municipality, we noted that 11 of the approved projects, valued at $121.7 million, were ranked at or near the bottom of the municipality’s own priority list, while other, higher-ranked eligible projects were not approved.
-
We noted that technical experts were generally not involved in assessing the applications even though thorough analysis by such experts would have helped assess the reasonableness of project cost estimates and identify those unlikely to meet the two-year completion deadline.
The report found that the government was unrealistic in expecting that projects that were approved for funding in 2009 could all be completed within the 2010 construction season. As the Auditor General noted, many of the projects encountered significant downstream issues attributed to, among other things, project size and complexity. The report found a lack of contingency planning for typical delays relating to weather conditions, soil conditions, permit approvals, and land ownership issues.
The Auditor General also found significant deficiencies in how the government documented the criteria and decision-making process behind the selection of specific projects. As the report noted, after civil servants completed their rushed review process, the final funding decisions were made at the political level in a non-transparent and undocumented fashion:
After assessment and review by civil servants in the appropriate ministries, applications were submitted to the office of Ontario’s Minister of Energy and Infrastructure and to his federal counterpart for final review and approval. With respect to this process, we noted that there was a general lack of documentation to support the decisions regarding which projects got approved, and which did not.
In some cases, ministers’ offices approved projects that civil servants had earlier deemed ineligible or about which they had flagged concerns. We found little documentation to indicate how, or even if, the civil servants’ concerns had been addressed prior to approvals being granted. Without such documentation, there is a heightened risk that the Ministry would be unable to demonstrate that the awarding of projects was open, fair, and transparent, or that political considerations did not come into play. In this regard, the results of our review of a sample of projects by electoral riding indicated there were no discernible patterns. Nevertheless, such approval decisions should be clearly documented and justified to ensure transparency and accountability in spending public money.
While the Auditor General’s report found no apparent preference given to specific electoral ridings, it noted that provincial staff were “not in a position to confirm whether a particular project was added or removed by the provincial or federal minister.” As the Ontario stimulus spending initiative illustrates, to better ensure public confidence in spending decisions, government institutions should implement proper planning and approval protocols for the funding of public projects.
