EDMONTON — Alberta’s auditor general has flagged $1.6 billion worth of accounting blunders along with oversight issues by Premier Jason Kenney’s government on big-ticket files including the Keystone XL pipeline and the so-called energy war room.

Auditor general Doug Wylie says the errors have been or are being corrected by the United Conservative government. But he highlights the importance of adhering to accounting principles so people have an accurate picture of what's going on.

“The overarching theme of this report is to ensure the importance of having good, sound, strong financial control processes in place, and then beyond that ensuring that you are following them,” Wylie said Thursday before delivering his fall report to the legislature. 

“It’s extremely important to ensure that that happens in times of (fiscal) restraint, when you are looking at various control processes and streamlining.”

Wylie’s findings revolve mainly around the energy portfolio.

The government has been selling off contracts to move oil by rail. The transportation plan was brought in by the previous NDP government, but the UCP deemed it ineffective and began off-loading 19 contracts to the private sector.

Wylie said the government at fiscal year end on March 31 treated those contracts as being off-loaded for accounting purposes, even though less than half of the deals were completed, forcing a $637-million adjustment to expenses.

He noted the government also had to make a $100-million adjustment to its Keystone XL pipeline investment. The government made that investment before fiscal year end, he said, but the money wasn’t reflected in the proper balance sheet.

Wylie also said the government failed to update its cash flow model for the Sturgeon refinery after prices cratered earlier this year due to COVID-19 and a global oil price war, leading to a recommended $795-million adjustment to expenses.

There was $152 million added to costs for two income support programs, including Assured Income for the Severely Handicapped, after Community and Social Services recorded 11 months of those numbers instead of 12.

The auditor said the department has adjusted its numbers “to appropriately disclose that Community and Social Services exceeded its budgeted appropriation by $120 million.”

The auditor also criticized the Environment Department for muddled oversight on grants handed out under a $563-million fund that places a levy on heavy industrial greenhouse gas emitters. The auditor said there wasn’t enough evidence to show that projects receiving fund money were in fact reducing emissions.

“For example, one of the grants was for dam maintenance, but we were not provided evidence to explain how the project reduced emissions or how it related to adaptation to climate change,” stated Wylie’s report. 

He also said the Canadian Energy Centre, known as the energy war room, had not been properly documenting contracts with outside contactors and that some expenses were incurred without appropriate approvals. 

The war room was created by Kenney in October 2019 with an annual budget of $30 million to fight perceived misinformation on Alberta’s staple industry. Wylie said by fiscal year end, the centre had spent $1.3 million on outside contracts, primarily through sole sourcing.

Sole sourcing is a valid procurement method, he said, but organizations must retain documents to ensure there are no conflicts of interest and that taxpayers are getting value for their money.

Opposition NDP Leader Rachel Notley said the auditor's report is a harsh indictment of a government that claims to be fiscally responsible.

"This is potentially the worst audit of a government in generations," said Notley.

"This government continually lectures Albertans that they are the only ones who can manage budgets."

Notley renewed her call to shut down the Energy Centre. 

She said issues cited by the auditor along with  previous public relations gaffes, including use of someone else's copyrighted logo, should spell the end of a high-cost experiment she said is hurting Alberta's reputation rather than helping it.

"(Kenney) must just shut down this gong show, immediately," she said.

A spokesman for Energy Minister Sonya Savage, in a statement, did not address the auditor's criticism on broader energy accounting practices, but did speak to the war room.

"The board of directors of the Canadian Energy Centre are committed to ensuring that fiscal reporting is comprehensive and transparent," wrote Kavi Bal.

"The Canadian Energy Centre has improved its contract management process policies and aligned it with government best practice."

The Energy Centre did not respond to an emailed request for comment.

Kenney’s government has seen its projected deficit this year soar to more than $24 billion from $6.8 billion due to collapsing oil prices and the COVID-19 pandemic.

This report by The Canadian Press was first published Nov. 5, 2020.

Dean Bennett, The Canadian Press