In 2006 Newfoundland and Labrador was rocked by news of a spending scandal
in the provincial legislature. Dozens of Members of the House of Assembly
(MHAs)sitting, retired, leaders, ministers, critics, backbenchersfrom
all three political parties had spent money in a dubious manner for more
than a decade. This article looks at the details of the scandal and the
subsequent reforms outlined by a special commission. It concludes that
while confidence in the Office of the Auditor General and the current Premier
increased, the publics trust in politicians and government was seriously
Beginning in 1989, members of Newfoundland and Labrador's legislature were
allocated an annual constituency allowance to offset costs associated
with performing their duties, such as office equipment, newspaper subscriptions,
and miscellaneous business supplies. The available allowance varied, with
St. Johns representatives each drawing up to $14,400 annually, whereas
Members of the House of Assembly (MHAs) in some geographically vast and
distant ridings accessing up to $84,800 per year (2006 figures). To access
these funds members were required to submit expenditure claims and supporting
documentation to the legislatures Director of Financial Operations. This
public servant was tasked with approving, correcting, or rejecting each
claim. If approved the expenditure amount was reimbursed to the member.
Between the fiscal years 1989-90 and 2005-06 approximately 18,400 claims
for nearly $25 million were processed for 115 MHAs.1
This suggests that,
on average, every member had been reimbursed $216,960 for 160 approved
claims. However some of them held office for less than a year while others
were responsible for large sums. Moreover, there were serious accounting
issues, much of which centered on a handful of officials.
The arbitrary nature of the constituency allowance expense process was,
in hindsight, a major problem. MHAs and their legislative staff frequently
sought guidance from the legislatures staff as to what goods and services
could be claimed as well as about the requirements for supporting documentation
(e.g., receipts). According to the Auditor General, the Clerk of the House
of Assembly concentrated on parliamentary matters and delegated the weight
of financial management to the Director of Financial Operations. House
staff provided inconsistent advice and even prepared some members claims.
The result was a mishmash of expenditures that were at times unethical
Inappropriate and Questionable Spending
Constituency allowances were established in 1989 upon the recommendation
of an independent commission. Gradually, elected officials adjusted compensation
practices in their favour, and when challenged would evoke the principle
of legislative independence. By 1996, some of the original framework safeguards
were being replaced by block funding for MHAs.
In 2000, the Office of the Auditor General discovered that claims for artwork
and wine had been processed for a sitting Cabinet Minister.2 This was brought
to the attention of a bipartisan (Liberal and Progressive Conservative)
committee known as the Commission of Internal Economy (IEC)of whom the
Minister in question was one of seven members. The IEC ruled that constituency
expenditures would be off limits to the Auditor General. Furthermore it
coordinated an amendment to the Internal Economy Commission Act which eliminated
the need for adequate proof of payment when claims were submitted. There
was consequently no scrutiny in subsequent years when financial data were
tabled in the legislature incorrectly indicating that members were spending
within their approved limits.
In early 2006, with the approval of Premier Danny Williams, the Office
of the Auditor General began examining constituency allowance spending.
During that summer, the government auditor issued several preliminary reports,
followed by a final report in September 2007. Spending was grouped into
nine categories: advertising and promotion, discretionary, donations, entertainment,
office expenses, per diems, travel, vehicle mileage, and unallocated (lacking
sufficient documentation). A wide range of inappropriate and questionable
spending was identified.
a) Additional Allowances
In 2004 the Commission of Internal Economy authorized a $2,875 top-up payment
which all but two of the legislatures 48 members accepted. This type of
additional remuneration had been awarded in past years and the Clerk had
been expressly urged by the IEC to keep the minutes of its meetings vague.
Such a discretionary payment would otherwise have been taxable income.
Approximately $120,000 in constituency allowance funds had been spent by
57 MHAs on alcohol purchased at retail stores. This does not include drinks
consumed in restaurants. The Auditor General noted that one MHA had been
personally reimbursed just over $34,000 for alcohol. This included purchases
made outside the province and receipts submitted with the details blacked
c) Capital Assets
Nearly $1 million of constituency allowance funds were spent on business
items with long term use, such as computers and mobile phones. The IEC
deemed that any such capital assets belonged to the legislature for the
first three years at which point the MHA became the sole owner regardless
of any remaining market value. This depreciation policy was particularly
inappropriate for artwork and furniture.
Almost all (108) MHAs since 1989 had used their constituency allowance
to make donations totalling nearly $1.5 million. This tended to encompass
a wide range of localized purposes, including school activities, community
festivals, clothing, household goods, passport fees, raffle tickets and
even the transportation of human remains. This spending implied that government
funds were given primarily to supporters or used to influence constituents
political preferences. As well, just over $50,000 was given to registered
charities, which raised the possibility of deductions being made on personal
income tax forms.
e) Double Billing
The lack of internal controls contributed to 88 MHAs claiming a total of
nearly $200,000 twice. Constituency allowance payments were sometimes approved
for original invoices, for copies of invoices, and again when proof of
payment was submitted. In some instances the same expense appeared more
than once on the same claim form. A further $17,000 had been claimed through
departmental accounts by Ministers, Parliamentary Secretaries and Parliamentary
Assistants and then again through their constituency allowances.
f) Excess Allowance Claims
The Auditor Generals most serious allegation was that five MHAs had been
remunerated for excess constituency allowance claims totalling nearly $1.6
million. He also questioned the legitimacy of some payments totalling just
over $2.8 million to four companies. Roughly half a million items such
as lapel pins, refrigerator magnets and key chains had supposedly been
purchased since 1999, as well as $69,000 spent on 79 customized MHA gold
rings displaying the provincial coat of arms.3.
g) Excess Discretionary Allowance
Until 2004-05, members were allotted a supplementary discretionary allowance
that was non-taxable and for which no receipts were required. This allowance
was for miscellaneous expenses. However, thirty-three MHAs collectively
received just over $200,000 beyond their discretionary limit, with four
of them being responsible for roughly $177,000 of such excess claims.
h) Insufficient Documentation
The Auditor General identified $5.4 million in constituency allowance payments
that involved unsatisfactory documentation, such as a photocopied cheque,
an undated claim form, or a credit card transaction. There were many vague
details, such as the instance of a non-descript convenience store bill
for $798, or airfare receipts with no itinerary information. The same five
MHAs who were cited for excess constituency allowance claims allegedly
received $534,000 backed by no documentation at all.
i) Office Rental and Equipment
There were three instances totalling nearly $50,000 where MHAs had drawn
on their constituency allowance for rents and/or expenses (e.g., renovations)
associated with a property that they owned or had a financial stake in.
Furthermore, invoices were the only documentation available regarding the
legislatures leasing of office equipment such as photocopiers (16 of which
could not be located), fax machines and shredders. There was no tendering
process for this and all purchases were made through the same supplier
at a cost higher than market value.
j) Partisan Spending
A comparatively small figure of $11,000 was deemed to have been spent on
party-oriented activities, such as political meetings, fundraising events
and post-election advertising.
k) Personal Items
Fifty-seven MHAs spent nearly $162,000 of constituency allowance monies
on merchandise and services that was likely for personal benefit and which
private citizens purchase with after-tax money. A wide variety of items
were claimed, including building supplies, family airfare, bicycle tune-ups,
cookware, flowers, perfumes, sunglasses, lottery tickets, cigarettes and
underwear. One member alone was reimbursed nearly $63,000 for goods such
as artwork and a $319 Cartier pen.
There were generally poor reimbursement procedures for vehicle mileage.
Claims were processed even when basic details such as dates of travel or
destination were omitted. A gradually increasing distance between St. Johns
and an electoral district was found as were calculations which suggested
that one members drive originated in the ocean. Four MHAs were compensated
nearly $58,000 for using their personal vehicles while concurrently charging
for a leased vehicle. Two other MHAs claimed nearly $7,000 for travel that
never took place, for vehicle mileage when in fact the member had flown,
and for St. Johns restaurant claims that conflicted with travel claims
which stated that the member had been elsewhere.
m) Sales Tax
The calculation of an MHAs remaining constituency allowance often did
not include the Harmonized Sales Tax (HST). As a result it was common for
the available limit to exceed the intended limit.
(Song on St. Johns radio station 94.7 CHOZ-FM, October 2007)
taxpayers! Might have known.
Tell me where you get the money from.
If a guy walks
in with new socks and shoes constituency allowance!
And if a guy walks
in with a case of booze constituency allowance!
If a guy got magnets on
his fridge constituency allowance!
And if he hops on a plane with the
wife and kids constituency allowance!
The Green Report and the Accountability Act
In between the Auditor Generals reports Premier Williams created an arms-length
commission to review the legislatures policies regarding members compensation
levels and spending controls. In July 2006, Chief Justice Derek Green of
the provinces Supreme Court began work on a report that would be released
the following May. The Green commission concluded that there had been a
broad-based systemic failure in the House of Assemblys administration
and that the public interest had not been at the forefront.4 Fully 80 recommendations
(which alone accounted for 52 of the weighty reports 674 pages) were made,
including advice to enact a draft bill. Some of these are summarized here.
a) Clearer Standards and More Accessible Information
Circulate organizational charts, policy information, job descriptions and
lists of the types of expenditures that qualify as a constituency allowance
expense. Items not qualifying for reimbursement should include artwork,
donations, gifts, raffle tickets and other peoples travel costs.
- Clarify the duties of the Clerk of the House in legislation, including
responsibility as the chief administrative and being the financial officer
reporting to the Speaker.
- Establish a code of conduct for elected officials, publish standards of
behaviour for legislature staff, and prepare a manual for MHAs.
- Post financial information concerning the legislature online, including
constituency allowance expenditures. MHAs financial information should
be subject to access to information requests.
- Prepare a strategic plan for the legislature that identifies goals and
- Replace the IEC with a restructured House of Assembly Management Commission
whose meetings are open to the public and whose discussions are recorded
in Hansard. Membership should include a third party (currently the New
- The Clerk of the House should be the legislatures accounting officer and
provide periodic financial statements to MHAs.
b) Stricter Controls, Monitoring, and Enforcement
- Create an Audit Committee whose duties should include reviewing internal
- Establish a Commissioner for Legislative Standards and introduce a whistleblower
- Have the Financial Administration Act apply to the legislature, which should
be subject to regular audit processes. Make it an offence to fail to document
or retain records of administrative decisions.
- Improve computer security procedures and provide staff training.
- Property such as furniture should be physically marked as belonging to
the legislature. The Clerk should maintain an updated inventory report.
- Provide money to MHAs to set up constituency offices, including at their
personal home, as long as they do not benefit from rent monies.
- Review the legislatures purchasing practices. The legislature should be
generally guided by the Public Tender Act, including compensating MHAs
for expenses only when a limit in a separate account has not yet been reached.
c) Increased Difficulty to Adjust MHAs Compensation
- Allowances should be used for constituency business rather than for personal
or family benefit.
- Compensation for MHAs and legislature staff should be set out in legislation
which will require a minimum of three session days to change. Management
Commission motions to change members allowances must be published online
and not voted upon until the next meeting. Salaries for MHAs should not
be changed until after a general election.
- Eliminate MHAs non-taxable allowance by integrating this into their taxable
base salary and establish a new pension plan structure for future members.
- Ensure that members are ultimately accountable for any allowance claims
or associated overspending.
- MHAs pay should be docked $200 for each sitting day they miss at the legislature,
unless there is an acceptable reason.
The Green report also recommended that restrictions should be placed on
the manner in which the Auditor General communicates any questionable spending
data. Rather than holding regular news conferences to reveal and explain
the latest improprieties, as was common in mid-2006, the Office of the
Auditor General must henceforth provide information exclusively in its
annual reports, as part of committee proceedings, or upon request of the
House of Assembly Management Commission. Accordingly, when he released
his final report in September 2007, Auditor General John Noseworthy deferred
all media requests to elected officials. Unfortunately the many representatives
of all three parties tended to avoid or refuse comment.
Efforts are underway to improve accountability and transparency in the
Newfoundland and Labrador legislature. The House of Assembly Accountability,
Integrity and Administration Act5 was passed in June 2007 within weeks
of Justice Green submitting his draft legislation. The House of Assembly
Management Commission has been struck. In October, a Members Handbook6
and a Members Allowances Rules Manual7 were circulated to MHAs and their
staff, and were made publicly available online. Further action is likely
such as whistleblower legislation.
Disciplinary and punitive action is ongoing. Four now-former MHAs (two
Liberal, one NDP and one PC) and the legislatures now-former Director
of Financial Operations have been charged by the Royal Newfoundland Constabulary
with offences such as fraud over $5,000, uttering a forged document and/or
breach of trust. These individuals and other members, most notably the
former Finance Minister, have been sullied in the mass media. Some sitting
and former MHAs have already repaid questionable payments and others have
made arrangements to do so. A handful of former members face government
efforts to recoup monies owing while many more are unlikely to return legal
but unpalatable payments.
This episode reminds us that, without sufficient scrutiny, government officials
can engage in behaviour that they deem appropriate but which is clearly
out of line with public preferences. The local political culture, a lack
of fiscally-minded interest groups and Premier Williams decisive action
may help explain why the public furor was relatively contained. In fact,
turnout in the subsequent election dipped rather than plunged, and the
PCs were returned with an even stronger majority. Nevertheless, the constituency
allowance scandal is clear evidence that there is reason to be concerned
when an Auditor General is prevented from reviewing government finances,
particularly amid all-party silence.
1. Office of the Auditor General, Report of the Auditor General to the
House of Assembly on a Review of Constituency Allowance Claims, 1989-90
through to 2005-06 (Sept. 2007), p.1.
2. Office of the Auditor General, Report of the Auditor General to the
House of Assembly on Reviews of Departments and Crown Agencies (Jan. 2007).
3. Office of the Auditor General, Payments Made by the House of Assembly
to Certain Suppliers (June 2006).
4. J. Derek Green, Rebuilding Confidence: Report of the Review Commission
on Constituency Allowances and Related Matters (May 2007): p.4-4.
5. Government of Newfoundland and Labrador, House of Assembly Accountability,
Integrity and Administration Act (2007).
6. House of Assembly, Members' Handbook (Oct. 2007).
7. House of Assembly, Members' Resources and Allowances Rules Manual (Oct.