B.C.’s Blue Box Battle: Should Our Auditor General Be Concerned With MMBC?

The Province's proposed recycling program, which comes into effect on May 19, will cost businesses $100 million per year...

Blue boxes in British Columbia have become the battleground for businesses trying to convince Victoria to scrap its MMBC plan.

by Kelvin McCulloch

CEO, Buckerfields

**********

The B.C. Auditor General does not have jurisdiction over the Multi-Material B.C. (MMBC) program set up by our provincial government.

But it should.

Under the Auditor General Act of B.C., the Auditor General has broad oversight responsibilities for all government organizations included in the B.C. Public Accounts:

  1. Government organizations come to be included in the Public Accounts if they are part of the ‘government reporting entity’ and report through the Consolidated Revenue Fund.
  2. Organizations come to report through the Consolidated Revenue Fund if they are in receipt of public money.
  3. Public money includes government revenue and money collected by a government corporation under an enactment.
  4. The Auditor General’s jurisdiction includes other government corporations that are controlled by government.

MMBC is arguably a government organization. It has taken over operational control and financing responsibilities for substantially all the recycling facilities in the province.

The organization is doing so under the auspices of Victoria’s Recycling Regulation. The recycling facilities were previously assembled and operated under the jurisdiction of local governments using taxpayer dollars. Now, MMBC has control and is pursuing a program of advancing recycling which is actually a public policy objective of the BC Ministry of Environment. Without approval and power delegated to it from the B.C. Ministry of Environment, MMBC could not do anything and would not exist.

MMBC is using monies collected from all the B.C. businesses that are caught by the Province’s Recycling Regulation to fund its operations. The Recycling Regulation funnels the companies to MMBC and forces them to pay up to $100 million per year under contract with that organization.

Although the arrangements are made in the form of contracts between MMBC and the individual companies, it is the province’s Recycling Regulation which forces the companies to sign the contracts. So, in substance, the fees are mandated by regulation, just like any other form of taxation. The actual amounts of fees are determined unilaterally by MMBC and not by reference to the cost of recycling the paper or packaging that flows through the businesses that have to pay.

Indeed, the fees are determined on the basis of how much MMBC decides to spend on recycling. There are stiff fines and penalties for companies that do not comply. The companies have no ownership in MMBC and no control over MMBC. They do not receive any services from MMBC,except the avoidance of fines and penalties.

MMBC chooses to set up whatever recycling facilities it wants, contracts with whomever it chooses, advertises however it likes, assembles whatever assets it desires and operates in a completely autonomous manner, except for the direct connection between itself and the B.C. Ministry of Environment which empowered it.

The Auditor General should be concerned with the MMBC program because, despite the form that the regime takes, it is a government program involving hundreds of millions of dollars that are collected from B.C. companies. Although the monies take the form of contract payments, they are in substance taxes paid by the companies to fund recycling in the province.

All the normal concerns associated with any government program involving the collection and expenditure of hundreds of millions of dollars apply to the MMBC program. Whereas the MMBC contract requires MMBC to appoint financial statement auditors, their role does not approximate the role of the Auditor General in addressing those concerns.

The Auditor General’s role includes oversight of efficiency, economy, effectiveness, legal and contractual compliance, procedural compliance and procedural appropriateness, in addition to the routine concerns of financial statement auditors.

Unlike the financial statement auditors who report to the MMBC Directors, the Auditor General reports to the Legislative Assembly. And ultimately, the Auditor General has the view to ensuring that none of the monies collected through statutory requirements stray from their intended purposes into the electoral environment where they do not belong.

Can the Office of the Auditor General undertake any sort of oversight of MMBC on its own?

Probably not, because every part of the program has been set up deliberately to avoid the statutory provisions which would enable Legislative oversight.

Should the Office of the Auditor General be concerned?

Yes, because of the enormous sums of money involved, the vulnerability of the companies which are forced by regulation to pay the money, and the direct relationship between MMBC with money in hand, and the B.C. Ministry of Environment.

A second reason is that if the government can transfer responsibility for recycling and all the funding mechanism required for it out from under the Auditor General’s jurisdiction and any Legislative oversight, it can do it again for something else, and then for something else.

Gradually, chunk by chunk, Legislative oversight of the public sector is lost and the business of government goes back behind closed doors where the public and those who pay for government no longer have a view of what is actually going on.

Should the Auditor General be concerned?

Indeed, it should be the responsibility of the Auditor General to speak up in a report to the Legislative Assembly to prevent exactly this sort of outcome.

There is scope in the statutory authorities which establish accountability in the province of British Columbia to resolve this situation.

Section 24(2)(d)(1) of the Budget Transparency and Accountability Act of B.C. anticipates that just such circumstances might arise. Under the section, the Minister of Environment could, after consultation with the Auditor General, request that the Lieutenant Governor in Council make a regulation to include MMBC in the reporting entity of the Province.

This would have the effect of bringing MMBC under the Province’s Budget Transparency and Accountability Act, the Financial Administration Act, and the jurisdiction of the Office of the Auditor General.

Alternatively, Section 14 of the Auditor General Act provides for the Auditor General to be appointed directly to serve as the auditor for MMBC. Both provisions would place MMBC within the framework of accountability of the Province of British Columbia and either outcome would allay the concerns of the companies paying into the scheme. Indeed, the public could rest assured that the financial arrangements which are currently outside any public scrutiny would be brought into line with appropriate standards for public programs and public expenditures.

Again, should the Auditor General be concerned?

Yes indeed, everyone should be concerned. The paying companies should be at the top of the list.

Can the problem be resolved?

Certainly.

The legislation which sets up the accountability framework for B.C.’s provincial government operations already contemplates such situations and has solutions at the ready to be implemented.

No one should have to pay monies mandated by government outside the accountability framework for government.

If the B.C. provincial government is determined to advance recycling so badly that it decides to force B.C. companies who are already taxpayers to pay an additional $100 million per year for the purpose, then it has an obligation to those who are spending the money, and those who are being displaced by the new program, and those who depend on recycling, to put the recycling program and all its financial operations within the framework of accountability which was set up in this province for this purpose.

*Kelvin McCulloch is the CEO of Buckerfields. He was written other columns for Black Press and is fighting to have the Province scrap its controversial MMBC rollout, which is scheduled for May 10, 2014.

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