By Connor Lynch
QUEEN’S PARK — “Bogus” accounting for the Independent Electricity System Operator (IESO), the crown corporation that manages Ontario’s electricity market, means Ontario’s annual deficit is $1.3 billion more than previously stated.
That’s according to Ontario Auditor-General Bonnie Lysyk, who spoke at the provincial standing committee on Public Accounts last month.
Lysyk further alleged that the IESO board and management obstructed her office from its investigative work, delayed providing relevant information, and refused to sign a document stating that all the relevant information had been given.
“This is what we’ve been dealing with: a situation where there are a lot of non-truths that are being provided to us during the course of the audit,” Lysyk told the committee.
Lysyk warned the committee that if the accounting isn’t corrected, she may have to issue an adverse opinion of Ontario’s public accounts, meaning that the accounting has not met industry standards.
Energy Minister Glenn Thibeault told the Toronto Star that the government has opinions from major accounting firms, including Ottawa-based KPMG which did the accounting for the IESO, that the accounting practices the IESO used meet standards for public accounting and are common in other jurisdictions. Lysyk fired back, saying that most of those other jurisdictions are in the U.S., and use U.S. accounting standards. “In fact, the situation with the IESO is different because none of the six other jurisdictions with entities similar to the IESO use Canadian Public Sector Accounting Standards.”
The problems started a year ago when the province introduced the Fair Hydro Plan, which temporarily reduced hydro bills. Lysyk alleged that the accounting of the plan was done in such a way as to avoid reporting the costs of the plan. Accounting firm KPMG provided advice on the plan.
KPMG was also retained by the IESO to handle its accounts. “That caused us some concerns because of the last-minute changes to IESO statements last year,” Lysyk said. “We confirmed that the changes that were made to the IESO statements were directly related to the fair hydro plan.”
Under Ontario law, KPMG, given that it is handling the accounts of a government agency, is accountable to the Auditor-General’s office. “They’re accountable to us in the sense that we review their working papers and we can ask questions.
“Unfortunately, there’s a different dynamic happening here in the sense that KPMG provided advisory services on the Fair Hydro Plan, but they are also the external auditors for IESO,” she said.
IESO treated the Auditor-General’s office “like we were subservient to KPMG. Management of IESO and the board would not cooperate with us, in the sense that they continually say they’re cooperating, but they stalled on giving us information. They wouldn’t sign the management representation confirming they gave us all the information.”
The IESO and KPMG denied the allegations and asserted that they’ve been cooperative with the auditor-general, the Globe and Mail reported.