This is a communication that I sent to the office of British Columbia’s Auditor General:
I note that one of your works in progress is an examination of public revenues from forestry.
In FY 2016, net revenues from natural gas royalties were less than the increase in amounts owed producers in unrecorded royalty reduction credits. Additionally, cash receipts from sales of rights were at near-historic lows. It can reasonably be argued that the province’s earnings from gas production were negative, since subsidies taken and accrued exceeded revenues.
Many of the gas and petroleum land parcels offered to bidders are for terms of three or five years. Those short terms may discourage new bidders from entering the process because, having no relationship with the ministry, they have less assurance that terms will be extended by administrators. Short terms and administrative extensions degrade the open bidding process.
This situation also brings into question the accounting matter of the extended amortization period for bonus bids. Should not the deferred income be brought into government revenue accounts according to lease terms, not a longer period that may have been logical previously but seems entirely arbitrary today.
My question is this: do you expect to do an examination of natural gas and petroleum revenues to determine if government is acting to mitigate revenue losses and is deferring rights sale revenues appropriately?
This initial response is from Colleen Rose, the Communications Manager for the Office of the Auditor General of British Columbia:
As for our forestry audit that you reference, it is focused on whether the Ministry of Forests, Lands and Natural Resource Operations established the necessary controls around timber harvest volume information to mitigate significant risk of revenue loss. As such, that audit won’t touch on the natural gas royalties that you mention, nor do we have anything in progress at this time. I should say though that we look at some aspects of what you’re asking about as part of our annual audit of government’s summary financial statements.
As I am sure you can appreciate, we receive numerous audit suggestions such as yours and have a rigorous process for determining which ones we take on given our limited resources. I forwarded your note below to our audit teams for their consideration. The best places to learn of our current and planned audits are the work in progress page of our website and our performance audit coverage plan respectively. These are our two main sources for publicly sharing our audit intentions.
With thanks for being in touch and if there’s anything further, please feel free to drop me a line directly.
The Auditor General’s Office has served British Columbia well but the outgoing government deprived it of resources that would have increased audit effectiveness. Politicians are inclined to inhibit the actions of authorities that might offer criticisms. Christy Clark did that but we can hope Premier Horgan will do the opposite.