Tuesday, February 24, 2009

Games security secrecy, overruns and taxpayer abuse

One of the surreal moments in last week's budget lock-up came when Finance Minister Colin Hansen was asked about Olympic security costs.
Yes, there was extra money in the budget for Games security, he said.
But the amount was secret.
So was where it had been hidden in the hundreds of pages of budget documents. The federal government wanted the costs to be kept from the public for now, Hansen said.
Two days later - on the day Barack Obama visited Ottawa and grabbed all the media attention - the federal government came clean.
Games security, which was to cost $175 million, is now forecast at $900 million. The cost might go higher and the figure doesn't cover all the Games-related security costs.
It's the kind of trick governments play when they hope to get away with something. If there's bad news - and a 500-per-cent increase in security costs is bad news - they try and release it on a day when there's a bigger story, or late on a Friday afternoon before a long weekend.
Hansen then came clean on the province's contribution. It's the kind of deal that would make most corporate CFOs nervous.
This gets a little hard to follow - always a bad sign when it comes to organizations' financial wheeling and dealing.
The original agreement was that the federal and provincial governments would each pay half of the $175 million.
As the real costs rose higher and higher, the governments secretly wrangled about how much the province should pay. B.C. feared being stuck with paying for new equipment or training exercises that weren't really needed for the Games.
Everyone played nice and B.C. agreed to pay about 22 per cent of the excess costs, instead of half - about $163 million on top of the already committed $87.5 million.
That was still bad news, since both Hansen and Premier Gordon Campbell had insisted the security budget was adequate.
The promised cap of $600 million on provincial Olympic spending - a total misrepresentation itself - had also been broken.
The Games are now, even by Campbell's accounting, more than 25 per cent over budget.
But here it gets weirder. The deal won't see the province actually write a cheque to Ottawa for the extra costs.
Instead, it cut a side deal. The federal government and B.C. have about $2 billion worth of cost-shared infrastructure projects in the works. The province will increase its contribution to those by $163 million; the federal share will be reduced.
On the plus side, it lets the province spread the spending over the next three years.
But the deal also distorts the province's budgets. You're supposed to record expenses as they occur. The Games security costs would have been included in the budget that Hansen just introduced. That would have pushed the projected deficit from $495 million to $650 million.
The whole Games security costs should be a significant scandal.
The $175-million security budget was part of the package used to sell the Games to British Columbians. The IOC said it was inadequate almost from the outset of the process. The auditor general warned six years ago that more money would likely be needed. The RCMP sounded the alarm.
But Hansen and Campbell continued to insist the funding was adequate. Even last year Hansen told the legislature he didn't expect the province to contribute more than $87.5 million for security.
So either the costs increased 500 per cent in the last few months, the government wasn't paying adequate attention or it wasn't being open and straightforward with the public. Or perhaps some combination of the three.
The big political problem is the secrecy and evasions. The Games' costs have actually been well-managed, particularly venue construction.
An early admission of problems with the security budget, along with a straightforward willingness to acknowledge all the real Games costs, would have headed off the scandal.
Footnote: How ridiculous was it to keep defending the original $175-million security budget? Consider that security in Salt Lake City for the 2002 Games cost twice that amount. By the Turin Games four years ago, the security budget had reached $1.4 billion. Yet B.C. still claimed that protecting the scattered sites in Vancouver and Whistler would cost far less.


Anonymous said...

Generally Accepted Accounting Principles?

Makes one wonder if this little slight-O-hand is consistent with GAAP, and if there is anything in the statutes that obliges the BC Liberals to comply with GAAP when tabling their budget.

Anonymous said...

Olympic security is now going to cost the Canadian taxpayer over $900 million and counting. According to the official 2010 Olympic site approximately 2500 athletes are expected to attend the Whistler/Vancouver winter Olympics. This works out to $360,000 per athlete for security costs alone. This figure is no doubt many times greater than their training costs and allowances, particularly at a time of declining corporate sponsorships. Does anyone else think things are serious out of line here? Here's a solution. For the IOC officials planning to attend why not say they are very welcome to come but that they can pay for their own security, perhaps from the many millions of dollars the IOC gets from selling television rights to the games. Send a similar message to other high profile attendees. If they choose not to attend that should free up more tickets for the people paying the bills, the Canadian taxpayers. Give every athlete who qualifies for the games $50,000 to use for training costs and to hire personal security for two weeks. I believe $50,000 per athlete should cover both. Total security costs, $125,000,000, the original cost we were quoted for security plus athletes could be spared the need to sell ad space on their helmets or pose for nude calendars to raise money for training.