POLITICS

Government audit of B.C. Lottery Corp. makes 25 recommendations

12/17/2014 06:59 EST | Updated 02/16/2015 05:59 EST
VICTORIA - A failed voluntary-retirement program that cost British Columbia's Lottery Corporation $25 million is a "shining" example of why business-and-management improvements are needed at the Crown corporation, says Finance Minister Mike de Jong.

De Jong said in a Wednesday news conference in Kamloops, B.C., that a lottery corporation restructuring exercise in March designed to cut operating costs by $20 million ended up costing $25 million.

He said the corporation's managers offered early retirement and severance packages to employees 50 years and older to reduce terminations, but instead of eliminating 68 positions, 142 people took advantage of the offer.

The package offered 18 months severance for some employees, regardless of their length of service.

"Not a particularly shining example of effective execution," said de Jong. "All in all the report reveals and confirms that there were some important failings within the HR management section of the corporation."

The review included 25 recommendations for the lottery corporation, including several aimed at strengthening business and management planning and saving money.

De Jong said the lottery corporation is implementing the recommendations and he's confident the message about sharpening business practices has been received.

"The public should take great comfort, as I do, in the fact that the lottery corporation has already, by its actions, signalled the seriousness with which it takes the recommendations," he said.

But Opposition New Democrat gaming critic David Eby said de Jong sugar-coated a report that raises serious concerns about the lottery corporation.

He said the report includes details of lavish spending on employees and managers, lack of adequate enforcement and few internal controls. Eby also questioned the vigilance of money-laundering enforcement at B.C. casinos since funding was cut in 2009 for a dedicated RCMP money-laundering squad.

Eby said the failed retirement plan offered senior executives 18 months' severance regardless of their length of service, and as many as 40 per cent of retailers who were tested sold tickets to minors.

He said the report reveals that bid documents for a major project were destroyed.

"The audit was put in the kindest of terms possible, but what it shows is a government agency that is significantly out of control," said Eby.

The report said the lottery corporation generates revenues of $2.1 billion annually after paying out prizes to winners. About half of the earnings support health care, education and social programs.

Lottery board chairman Bud Smith said the corporation accepts the 25 recommendations and is in the process of implementing them.

"The execution has not been good at all," he said.

Smith said the corporation is set to deliver record revenues this year and is the third-most profitable company in B.C.

The review also comes after a $125,000 severance package given to former lottery boss Michael Graydon sparked intense debate in the legislature earlier this year.

The evaluation wasn't set off by Graydon's departure, de Jong said it was simply part of the government's commitment to review operations of all of its Crown corporations.

A government review on the severance package found that Graydon was in a conflict of interest while he was negotiating to take on the new job. Graydon later paid back $55,000 in wages he collected.