Sue's Blog

Saturday, November 11, 2017

Thursday, October 12, 2017

More Breaking News

Puerto Rico as you have all probably heard by now - is essentially bankrupt - on fiscal life support - in need of massive bailout. It is considered impoverished.

Newfoundland and Labrador on the other hand is designated as a "have province". That puts us ahead of the provinces collecting equalization.

 In the 2017-2018 year, the following provinces will receive equalization payments:
  • Quebec ($11.081 billion)  (please note this amount) program designed to suit them.
  • Manitoba ($1.820 billion)
  • Nova Scotia ($1.779 billion)
  • New Brunswick ($1.760 billion)
  • Ontario ($1.424 billion)
  • Prince Edward Island ($390 million)
Back to Puerto Rico

Outstanding debt: 70 billion
Population: 3.4 million
$20,588 per person 

Unemployment 10%

Newfoundland and Labrador
Outstanding debt: 13 billion
Population: 528,000 
$24,621 per person

Unemployment 15%

This does not include the 13 billion dollar boondoggle Muskrat.

Both Puerto Rico and Newfoundland and Labrador see migration to the continental parts of their countries - both permanently and for temporary work.

Puerto Rico and Newfoundland and Labrador are losing population.

Puerto Rico's aging demographics are much healthier than Newfoundland and Labrador's 

We must also consider that Newfoundland and Labrador receives as all provinces do - transfer payments for programs such as health and education not so much for Puerto Rico.

There is a three-pronged problem here.

The first is the understanding or lack thereof of the Equalization program. I have discussed this briefly in a previous post.

The second is that even the reasonable or equitable (to some degree) parts of equalization - leaves us essentially bankrupt because although we have the resources to generate tax, royalties, revenues - we have mismanaged the resources so badly that what equalization considers we should generate from resources - we don't actually generate from them. (oil revenues unfair part)

The third problem is the absolute ignorance deliberate or otherwise of our politicians - refusing to actually understand the mess we are in.

And these same people continue to permit spending on Muskrat Falls.

The people of Puerto Rico just like the people of Newfoundland and Labrador love where they live and want to stay. However both jurisdictions are likely to see significant migration to their respective "mainlands" simply to survive and thrive.

Note to Labradorians - my use of the word "mainland" does not refer to you. I recognize the difference.   


Wednesday, October 11, 2017


Yesterday Sue's Blog focused on the journalistic style of James McLeod in his story headlined "Nalcor audit won’t be done before retirement: AG".

Today let's look at some of the other information we can take from this interview.

The AG Terry Paddon is retiring at months end. He leaves behind an unfinished audit of specific operations of Nalcor.

The story does not tell us some important things.

How far along is the audit?
When did Paddon expect to finish it when it began?
Did he run into unforeseen difficulties in attaining the information he needed?
Was it Paddon's intent to finish the audit before he retired?
What does Paddon think the cost will be to finish it?
Is it more costly under a new Auditor General than if he completed it before he retired?
Did he find anything worth noting now?

Terry Paddon is one of those nice people. Not much - I've ever seen in his personality that would put people off. He is a professional by designation and as best I could tell - took his role seriously.

Paddon - however - missed a couple of key areas in his tenure with the Department of Finance and as Auditor General. He missed some real activity regarding the Federal - Provincial Fiscal Arrangements Act (Equalization) - despite being alerted to it.

Equalization - as the program is normally referred to - primarily has been to the benefit of Quebec. The program which Stephen Harper promised he would change but then did not - I assume was kept whole for Quebec.

Harper's promise to remove royalties from non-renewable resources from the formula - would have meant that our oil revenues could have served to improve the lives of future generations so much more. That was a digression. (still angry at CPC for deliberately conning Newfoundland and Labrador and "Seantor" Manning's standing at Harper's side as he did it)


Many people may not have noticed - but Hydro-Quebec does a significant amount of public program spending. They have been doing that for decades.  Why is the question....


Back in 2000 Stephane Dion then President of the Queen's Privy Council and Minister of Intergovernmental Affairs appeared on Bill Rowe's Open-Line. I asked questions the Minister could not answer on line - so he did as he promised - wrote me the answers to my questions.

Below is the response: 

"On the question of the treatment of Churchill Falls under the Equalization program, it should be noted that an adjustment has been made in the calculation of Equalization payments since 1982 which takes into account how Churchill Falls hydro is priced. Equalization payments are based on the relative ability of each province to raise taxes; and the Churchill Falls adjustment shifts some capacity to tax hydro sites from Newfoundland to Quebec. The net effect is to reduce Quebec's annual Equalization payments while raising Newfoundland's. Furthermore, to the extent that profits from Churchill Falls translate into profits to Hydro Quebec that are remitted to the Quebec government, these too have the effect of lowering Quebec's Equalization."

Right from the get-go we were being further penalized on the Upper Churchill - while Quebec reaped even more benefits. Then the formula was changed to reflect the real contract (albeit not enough in my opinion).

Were we ever compensated for the past - NO.

The real kicker though was found accidentally in the last sentence of Dion's response.  "Furthermore, to the extent that profits from Churchill Falls translate into profits to Hydro Quebec that are remitted to the Quebec government, these too have the effect of lowering Quebec's Equalization."

That little remark was an eye opener for anybody watching Hydro-Quebec - as I certainly was.

The hundreds of News Releases coming out of Hydro-Quebec in those years were phenomenal. Now it made sense. Before profit - expenses come out. If Hydro-Quebec delivered or helped to deliver public programming on behalf of the Government of Quebec - they lowered their profits - while the province of Quebec saved equalization money - which gave the province even more to spend on public programs.

In short - Hydro-Quebec making billions off our resource - reduced their profits - lowered remitances to the government - in some years almost to zero - to avoid the loss of equalization. This in turn exponentially increased the value from Labrador resources for Quebec.

At the time Newfoundland and Labrador Hydro was making money and was remitting profits to Newfoundland and Labrador. At the time we could have taken advantage of the same. Today Nalcor is not "profitable" - only by force of the PUB, our laws, and oil activity. Nalcor never did do the investment and development that Hydro-Quebec has successfully. 

Terry Paddon was aware of this and we did nothing. We sat on our hands and did nothing.

The political and media spin in Newfoundland and Labrador became we MUST become a "have" province. The romantic - naive - irrelevant title of "have". The "have being based on a formula that could see a financially destitute province be "have" while a thriving growing super power province be "have not".

Let me be more clear: Quebec has an unemployment rate of 6% Newfoundland and Labrador is at almost 15%. The population in NL was 530,854 in 1971 and 528,817 in 2017 meanwhile the population in Quebec was 6,137,305  in 1971 and 8,394,034 in 2017.  Provincial debt NL is $23,052 per person while in Quebec it is $22,104. This does not include the albatross of 13 Billion for Muskrat Falls. Then we take into account that Nalcor is not financing all it's own obligations - we put in a fair chunk and it is only barely profitable because of oil operations. When compared to Hydro-Quebec which has hundreds of millions in profits - without oil revenues.

Paddon failed by not describing what equalization truly is and how the system works. It's not all his fault - but political masters should not have had that much say.

The media - should really get its collective act together and do some real reporting. It should make itself knowledgeable about important issues and policies before it puts out fluff - this denying the people of balanced information on which they can make a decision.

It is no longer acceptable to have zero leadership in politics and zero accountability of the news media.

We are broke. We continue to repeat mistakes. We continue to dream without doing anything that remotely will help us achieve our dream of prosperous future. 

By the way - are there any MHA's willing to wade in to this discussion or members of our "press corps"?


Tuesday, October 10, 2017

McLeod and Paddon - Spin on the Spin

James McLeod presented a news story on October 7th in the Telegram.

It was headlined "Nalcor audit won’t be done before retirement: AG"

As usual - pose a question - get an answer - print answer. No follow-up, no definitions of terms used, and no independent thought respecting the answer.

I'll get into Auditor General in another post - but for now - let's watch this "journalistic" masterpiece unfold.

The conversation between the two must have wandered into the need for a forensic audit. McLeod reports as follows on that question:

Paddon was cautious when talking about a potential forensic audit for Muskrat Falls. He said he knows it wouldn’t be cheap though.

“I’m not quite sure that the word ‘forensic audit’ is appropriate. I mean, I think really what people are looking for is for somebody to go in and look at, perhaps, the decision-making process and the execution process, and those sorts of things,” he said.

“It would take a lot of time and a lot of resources. The outcome? I have no idea what the outcome would be.”


1. Paddon was cautious but did say it wouldn't be cheap though.

Question: what's cheap? why are you cautious? 

2. Paddon was not quite sure that the word 'forensic audit' is appropriate.

Question: why is it not appropriate? what part of a forensic audit would be inappropriate? 

3. Paddon believes he knows what critics are calling for - decision making and execution process

Question: how does that fall out of the purview of a forensic audit? Why do you believe "people" are only looking at those components? 

4. Paddon believes it would take a lot of time and a lot of resources.

Questions: How much time would this forensic audit need? How much would it cost. Cost relative to what? What might be the cost of NOT doing it? 

5. Paddon has no idea what the outcome would be.

Question: is that perhaps why people want one done? Is the reason you can't speculate on the outcome because you do not know what perimeters would be set? 

and of course: Based on the doubling of the costs, hidden documents, continued extension on time-table for completion, independent contractors information hidden from shareholder. Don't these things present a red-flag to an accountant? 


Now let's do a bit of research ourselves and see if a forensic audit is exactly what we are asking for and know that we need.

Forensic auditing is a specialization within the field of accounting, and forensic auditors often provide expert testimony during trial proceedings. Most large accounting firms have a forensic auditing department.

The audit covers a wide range of investigative activities performed by accountants. The process may also include serving as an expert witness in a fraud trial.

The investigation process follows a similar path as a regular audit of financial statements. The steps can include planning, review and a report. If the investigation was undertaken to discover the presence of fraud, evidence is presented to uncover or disprove the fraud and determine the amount of the damages suffered. The findings are presented to the client — and possibly the court should the case go that far.
During the planning stage, the forensic auditing team establishes objectives, such as identifying if fraud has been committed, how long it has been going on, the parties involved, quantifying the financial loss and providing fraud prevention measures. While gathering evidence, the team collects evidence in the proper manner in order for it to be used in a court case. There are various techniques used to gather evidence. A report is produced for the client with the findings. Lastly, those involved in the forensic audit may be asked to present their findings to the court.
Forensic audits uncover several types of fraud. The most common involves theft, including cash, inventory and fraudulent payments. Another type of fraud is corruption, such as a conflict of interest, bribery and extortion. The last major category is financial statement fraud. This relates to misstatements of the financials of a company.

Above information can be found HERE

There are many other sites - but this should suffice to ensure that what we are asking for is exactly what we want and need. 

This blog has already posted the RED FLAGS post on the need for a forensic audit. 
McLeod should have put to a few known critics - the responses of the Auditor General and get another take on it. 
This - let me find a source who has a title and a designation - and I can write a news piece is flawed and can lead to the readership relying too much value on the information presented. 
This is the spin of spin and is yet another artificial deterrent to completing a forensic audit and attempting to curtail increased calls for a forensic audit. 
It seems to me there are many people who just want this whole sordid mess to disappear. Unfortunately for them - social media is alive and growing.