Business-class travel and smartwatch data among excess spending flagged in OilCo AG report

Newfoundland and Labrador’s auditor general raised a concern Wednesday during her first audit of Oil and Gas Corp., a state corporation spun off from now-liquidated Nalcor Energy.

Denise Hanrahan says her staff found that leaders of the corporation, known as OilCo, refused to follow government job classification guidelines. They also found a lack of oversight of public funds and gaps in compliance with conflict-of-interest rules — something she called “a very critical part of public service.”

“It surprised me that a government corporation would actively go against the directives issued by the Treasury Board,” Hanrahan told reporters at a news conference in St. John’s on Wednesday.

The 33-page report is the first of its kind on the young state corporation, which operated as part of Nalcor Energy until it was dissolved in 2021. The Liberal government closed Nalcor over its handling of the Muskrat Falls hydroelectric project, transferring non-oil assets to Newfoundland and Labrador Hydro.

OilCo conducts offshore oil and gas operations off the coast of Newfoundland and Labrador on behalf of the provincial government. However, the report found the corporation did not operate in accordance with all government guidelines.

For example, OilCo does not rank positions on government pay scales, and most salaries exceed those for similar government positions.

For Nalcor employees who transfer to OilCo, classification may impact income.

“The classification would likely result in an indefinite pay freeze or termination of employment and re-filling of affected positions,” Jim Keating, the corporation’s chief executive, said in the report.

Keating’s income is about $312,740 a year. A similar position in the government is $182,789.

OilCo spent $23,805 on a consultant to classify jobs before the corporation’s board abandoned the process. The corporation then spent $79,821 on an alternative classification.

Hanrahan’s first recommendation is for OilCo to classify its positions based on government criteria, in line with provincial guidelines.

The corporation refused. Instead, they continue with a market-based compensation system comparable to NL Hydro.

Smartwatch data

Job classifications are not the only shortcoming Hanrahan identified in her report.

“The second lesson I learned from this is the use of public money and the lack of oversight of spending,” she said.

OilCo misused public funds, overspending on telecommunications, rent and travel, the report said. For example, technology that belonged to some former employees remained active long after they left the corporation.

In one case, a geophysicist and engineer came from Nalcor in early OilCo with smart watches. These watches had data plans that were active for three years, totaling $720.

Two cells remained active for 19 months after employees left the organization, totaling $671.

For general cellular telephone services, OilCo paid $6,259 more than necessary during the audited period.

According to the report, the corporation did not opt ​​for the cheapest monthly service package plan.

Rented furniture

Hanrahan said the corporation pays exorbitant rent for its headquarters on Hebron Way in St. John’s, with $50,845 of the annual lease going specifically to pay for “equipment and furnishings.”

“Fittings and Furnishings” refers to 237 pieces of furniture, artwork and appliances rented by OilCo, as well as initial interior preparation for move-in in 2017.

“During our scope period, these expenses totaled $152,535. Over the initial five-year lease period and the subsequent five-year renewal period, fixtures and furnishings would have cost $508,455,” the report said.

Travel costs were also high at OilCo. Two employees upgraded from economy to business class on a flight to France, paying an additional $10,268 to change their tickets.

In another case, an employee upgraded the flight to a higher class for an additional fee of $1,058.

The provincial government has strict criteria for travel expenses. Economy class airfare is standard unless business class is required, such as when economy class seats are unavailable.

Gaps in compliance with conflict of interest laws were another area of ​​concern for Hanrahan. The report found that OilCo board members had not completed annual certification by 2023, as required by its code of business ethics and conduct.

Until September of last year, the corporation did not provide employees and contractors with formal conflict of interest training.

Recommendations

Hanrahan made five recommendations to OilCo, four of which the corporation accepted, while rejecting the recommendation to classify employment on a government scale.

OilCo has adopted recommendations to fill necessary vacancies, ensure that expenditures are incurred in accordance with government policies, develop monitoring and reporting processes to ensure that expenditures are incurred, and ensure that all directors, employees and certain contractors are trained in conflict of interest policies and that certification of understanding and compliance, as well as disclosure of any conflicts, is conducted annually.

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