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Opening Statement to the Yukon Legislative Assembly
Government of Yukon's Investment in Asset-backed Commercial Paper—Department of Finance
Government of Yukon's Role in the 2007 Canada Winter Games
Sheila Fraser, FCA
Auditor General of Canada
7 February 2008
Thank you, Mr. Speaker, and good morning everyone. I am pleased to be here to present the two reports that I transmitted to the Speaker of the Assembly earlier this morning. I am accompanied by Andrew Lennox, Assistant Auditor General, and Eric Hellsten, Principal responsible for this audit. The first of our two reports is on Government of Yukon's Investment in Asset-backed Commercial Paper—Department of Finance, and the second one is on Government of Yukon's Role in the 2007 Canada Winter Games.
Government's Investment in Asset-backed Commercial Paper
Let me begin with the Government's investment in asset-backed commercial paper.
In the summer of 2007, the Government of Yukon invested a total of $36.5 million in asset-backed commercial paper issued by two trusts that were set up by non-banks. Along with many other investors, the Government was unable to recoup its investment at the maturity dates.
We found that the asset-backed commercial paper in which the Government invested was not one of the three types of investment permitted by the Financial Administration Act. It was not guaranteed by the Government of Canada or any provincial government. It was not issued or guaranteed by a bank. And it was not issued by a company incorporated federally or provincially and given the highest rating by at least two recognized security rating institutions.
In addition to this $36.5 million of investments, we also found that the Government has, for a number of years, made investments in asset-backed commercial paper issued by trusts set up by both banks and non-banks. The Department was aware that the trusts that issued the asset-backed commercial paper had liquidity agreements and it viewed these agreements as a guarantee that the principal would be repaid when the commercial paper matured. Although the Government redeemed all these investments on maturity, none of these investments met the conditions set out in the Act either.
A group of financial institutions has proposed a restructuring to replace about $33 billion in asset-backed commercial paper issued by trusts set up by non-banks with notes that mature over longer terms. As you know, the Government has not received any repayment of principal and interest from the two trusts since September 2007 and has not yet determined the extent of its losses.
The Government has recently approved an investment policy that restricts it from investing in asset-backed commercial paper.
Government of Yukon 's Role in the 2007 Canada Winter Games
Let me now turn to the Government of Yukon's Role in the 2007 Canada Winter Games.
An event of this size, importance, and visibility, with planning and delivery involving several partners over a number of years, is a major undertaking that tests all the elements of good project management. The financial and human resource challenge was significant and managers' decisions relating to the Games were complex.
Of the five major partners in the 2007 Canada Winter Games, the Government of Yukon made the largest financial contribution, providing $64 million of the $120 million cost of the Games. The Games were seen as a vehicle to provide economic benefits and raise the Yukon 's profile for tourism and investment.
The audit looked at how the Government:
- identified and managed the risks associated with its involvement in the Games,
- identified and met its obligations, and,
- ensured that the resources it contributed were used economically, efficiently, and effectively.
We also looked at whether the Government recognized and properly accounted for the costs it incurred for the Games and whether it evaluated the results of its involvement. Our audit included the planning and construction of the Athletes' Village by the Department of Community Services.
Risk management practices are important for an event of this size in managing the uncertainty of future events and the potential impact of the identified risks. We found that the Government generally managed the process well by taking steps to mitigate most of its risks relating to its involvement with the Games.
Providing accommodation for athletes was one of the key risks of the Games and was the responsibility of the Host Society. By the time Management Board learned that the Host Society would be unable to provide the athletes' residences, the Government's opportunity to find lower-cost options was limited.
The Report also notes that the Government contributed $43 million more than its original estimate, largely because of the extra cost related to the athletes' accommodations. However, these residences were later used for seniors' and student family residences.
We found that once the Government took control of the Athletes' Village project, the Department of Community Services followed good project management practices. Despite the difficult position it was placed in when it assumed this responsibility late in the process, the Department completed this critical project in time for the Games. We found that the cost of the buildings was reasonable and that a process to control quality during construction was followed by the project management team. The Government succeeded in managing this complex project well.
That concludes my opening statement. I would be happy to answer your questions.