Dear Charlie,
This op ed Agriweek article by Morris W. Dorosh is bang on!
Auditor general Sheila Fraser seems like a busy gal, so
it will be a while before her office can get around to the
audit of the Canadian Wheat Board desired by agriminister Ritz. It will be so long that it is more like never.
The idea of the audit was Ritz’s response to the loss of $89.5 million incurred by the Board on ill-advised and amateurishly-
executed futures trades on the Minneapolis Grain Exchange in connection with the alternative pricing and payment
programs, and then dipping into pool accounts to cover it. Actually the minister responsible for the Board, under
the byzantine Wheat Board Act, does not have the authority to order an audit. No other minister responsible for any
crown agency has this limitation. Any audit of the Wheat Board must be requested by the Wheat Board. A similar situation
would prevail if the police were allowed to investigate bank robberies only when asked to do so by robbers.
The last time the auditor general did a Wheat Board audit, deliberately limited in scope, was in 2002. It took two years
and did not produce any substantive findings. The auditor was not allowed to see all records and apparently did not ask
particularly probing questions.
The Wheat Board did offer to submit, sort of, to an auditor general’s audit after issuing its annual report last month. A
Board news release on Feb. 17 quoted chairman Hill as saying it would “welcome a review of the process by the Office
of the Auditor General of Canada.” A matter of semantics arose. To Hill the ‘process’ obviously is limited to decisions
the Board took with respect to the contingency fund, but it did look like an acceptance of some scrutiny from the outside.
On Feb. 26 Ritz wrote to the Board to take up its offer, except that he had in mind “a full audit of all operations.” He
said federal auditors must have “access to all of the CWB’s books and operations” without “any half-measures,” and
that the Board “must not limit the scope” of the investigation in any way.
This was not what chairman Hill meant. Usually the Board’s reaction to anything the minister says or does is instantaneous.
But it took until March 2 for this response, and instead of indicating that it has nothing to hide and that the auditor
general’s people are welcome in Winnipeg any time, it was another request for a meeting with the minister. The
Board wants to “go over” its financial results with the minister, presumably to talk him out of pressing this pesky audit
business. It noted that net returns to farmers during 2007-08 from the Board were 60% higher than in 2006-07, as irrelevant
a statement as could be in the circumstances. It also scolded the minister for “incorrect comments concerning the
CWB’s contingency fund”, on the basis that the only correct interpretation is the Board’s official line.
So the Board is not at all as ready to open its books to the auditor general as it implied, and under its legislation no one
can force it to do so. The Board is stalling, trying to bottle-up the minister, which it also has the ability to do. The auditor
general’s office is the only entity that can explore the use of public money and verify if it is being managed appropriately.
No one will ever know what went on or how the $89.5 million disappeared, or even if $89.5 million is truly the
full extent of the loss.
The Board is protecting itself as an organization, as all large organizations do. And while the taxpayers of Canada are
on the hook for its financial affairs, there is no means to assure them that the ensuing risks are reasonable, necessary or
manageable.
In some farm circles there have been demands for a ‘forensic’ audit of the Board’s affairs. ‘Forensic’ implies crim inal
misdeeds, often associated with illegal personal gains at the expense of an organization. There is no suggestion that anyone
at the Board personally profited from the futures market squeeze play into which the Board fell due to its hedging
activities. Talk of forensics is not strictly called for. The loss resulted from a faulty strategy incompetently executed.
The strategy was faulty because it involved the Board in futures trading in which it has no expertise and where it had no
business being.
Unless some way is found to make the Board accountable to someone, there is no telling what else is going on or may
go on in the future. The notion that farmer-elected directors control the Board is theoretical in the extreme. Practice also
does not necessarily resemble the theory. Ever since the present governance structure was devised, there have been stories
about how the directors are routinely manipulated by Board management, are in over their heads in the complexity"
This op ed Agriweek article by Morris W. Dorosh is bang on!
Auditor general Sheila Fraser seems like a busy gal, so
it will be a while before her office can get around to the
audit of the Canadian Wheat Board desired by agriminister Ritz. It will be so long that it is more like never.
The idea of the audit was Ritz’s response to the loss of $89.5 million incurred by the Board on ill-advised and amateurishly-
executed futures trades on the Minneapolis Grain Exchange in connection with the alternative pricing and payment
programs, and then dipping into pool accounts to cover it. Actually the minister responsible for the Board, under
the byzantine Wheat Board Act, does not have the authority to order an audit. No other minister responsible for any
crown agency has this limitation. Any audit of the Wheat Board must be requested by the Wheat Board. A similar situation
would prevail if the police were allowed to investigate bank robberies only when asked to do so by robbers.
The last time the auditor general did a Wheat Board audit, deliberately limited in scope, was in 2002. It took two years
and did not produce any substantive findings. The auditor was not allowed to see all records and apparently did not ask
particularly probing questions.
The Wheat Board did offer to submit, sort of, to an auditor general’s audit after issuing its annual report last month. A
Board news release on Feb. 17 quoted chairman Hill as saying it would “welcome a review of the process by the Office
of the Auditor General of Canada.” A matter of semantics arose. To Hill the ‘process’ obviously is limited to decisions
the Board took with respect to the contingency fund, but it did look like an acceptance of some scrutiny from the outside.
On Feb. 26 Ritz wrote to the Board to take up its offer, except that he had in mind “a full audit of all operations.” He
said federal auditors must have “access to all of the CWB’s books and operations” without “any half-measures,” and
that the Board “must not limit the scope” of the investigation in any way.
This was not what chairman Hill meant. Usually the Board’s reaction to anything the minister says or does is instantaneous.
But it took until March 2 for this response, and instead of indicating that it has nothing to hide and that the auditor
general’s people are welcome in Winnipeg any time, it was another request for a meeting with the minister. The
Board wants to “go over” its financial results with the minister, presumably to talk him out of pressing this pesky audit
business. It noted that net returns to farmers during 2007-08 from the Board were 60% higher than in 2006-07, as irrelevant
a statement as could be in the circumstances. It also scolded the minister for “incorrect comments concerning the
CWB’s contingency fund”, on the basis that the only correct interpretation is the Board’s official line.
So the Board is not at all as ready to open its books to the auditor general as it implied, and under its legislation no one
can force it to do so. The Board is stalling, trying to bottle-up the minister, which it also has the ability to do. The auditor
general’s office is the only entity that can explore the use of public money and verify if it is being managed appropriately.
No one will ever know what went on or how the $89.5 million disappeared, or even if $89.5 million is truly the
full extent of the loss.
The Board is protecting itself as an organization, as all large organizations do. And while the taxpayers of Canada are
on the hook for its financial affairs, there is no means to assure them that the ensuing risks are reasonable, necessary or
manageable.
In some farm circles there have been demands for a ‘forensic’ audit of the Board’s affairs. ‘Forensic’ implies crim inal
misdeeds, often associated with illegal personal gains at the expense of an organization. There is no suggestion that anyone
at the Board personally profited from the futures market squeeze play into which the Board fell due to its hedging
activities. Talk of forensics is not strictly called for. The loss resulted from a faulty strategy incompetently executed.
The strategy was faulty because it involved the Board in futures trading in which it has no expertise and where it had no
business being.
Unless some way is found to make the Board accountable to someone, there is no telling what else is going on or may
go on in the future. The notion that farmer-elected directors control the Board is theoretical in the extreme. Practice also
does not necessarily resemble the theory. Ever since the present governance structure was devised, there have been stories
about how the directors are routinely manipulated by Board management, are in over their heads in the complexity"
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