Tuesday, May 24, 2005

Columbia Basin Trust stumbles show need for public alertness

VICTORIA - You should care about problems at the Columbia Basin Trust, both because it's your money and because they show the need for public scrutiny of economic development funds promised in the Liberal campaign.
The trust is beloved in the Kootenays, where it's seen as belated economic justice.
The 1961 Columbia Treaty with the U.S. saw B.C. agree to build dams on the river system to help the Americans produce more power downstream. B.C. got cash in the deal; communities in the way got flooded out.
People in the region kept demanding a share of the benefits, and in 1995 - after the treaty came up for renewal - the NDP government agreed. It set up the trust, which now manages more than $460 million in assets. Earnings flow to a range of community projects.
But all is not well, with the damning finance ministry review only the latest problem. Liberal MLA Barry Penner asked for the review, citing questions about the relationship between Ken Epp, the CEO of trust subsidiary Columbia Basin Trust Energy, and ZE PowerGroup Inc. of Vancouver.
Epp is a part-time CEO, who billed about $600,000 over a three-year period. Among his other consulting clients is ZE Power, which received about $2 million worth of contract work from CBTE during the same period.
The trust's directors, appointed by the province, are showing an alarming lack of concern and openness.
Visit the trust's web site and there's a release from chair Josh Smienk saying that he's "very pleased" that the finance ministry audit didn't find any "actual conflict of interest" on the part of Epp. The subsidiary met all applicable legal requirements, Smienk proclaims. That is true, and it's important.
But the trust's response is wildly unsatisfactory, considering what else the review found.
Epp was in "a perceived and potential conflict of interest," the ministry review reported. "We believe that Mr. Epp has not completely complied with CBTE's Conflict of Interest Guidelines and we also believe that these guidelines do not go far enough to avoid and manage the risk of conflict of interest," it said.
Minimum legal requirements were met, but not "the higher standards that are expected of a person serving the public to avoid and manage the risk of conflict of interest."
The review also called criticized spending practices, including spending money without any approved budget. "Controls were not in place to provide assurances of fairness and value for money for the contracts examined and it was difficult to determine whether these contracts were approved," the report found. "With CBTE's low staffing levels and the perceived conflict of interest of the CEO, it is difficult to effectively manage contracts."
It is not a report that should make board members - or the public - "very pleased."
These are only the latest problems for the trust. In March the board said it wasn't renewing the contract of trust CEO Don Johnston, with no explanation. Interviews for a replacement don't start until next month.
And last year the directors had to cancel a plan to sell the corporation's power-generation business to BC Hydro. The board approved a deal to sell its 50-per-cent interest in four power plants to BC Hydro for $260 million, planning to invest the money.
But the public, still edgy because the Liberals shifted power on the board from local representatives to provincial appointments, hated the idea, and the board retreated. (The plan probably made sense.)
The trust is politically sensitive, and none of the parties wanted it raised as a campaign issue. But expect it to get political attention once the legislature returns.
Meanwhile, the problems should inspire more alertness across the province.
The Liberals have already created the $85-million Northern Development Initiative. During the campaign they promised an extra $50 million for that fund, and $50-million economic development trusts for the southern Interior and and the Vancouver Island/Coast region.
All good ideas. But the trust issues highlight the need for public scrutiny.
Footnote: The new trusts - like the Northern Development Initiative - are likely to be governed by boards of regional and provincial politicians. The legislation setting them up will be in place this year, but if the NDI is an indication it will be well into 2006 before any money flows.

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