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REPORTING · 18th April 2012
Merv Ritchie
The Auditor General of BC has recently completed and released a report on the performance of the three trusts set up by the Government of BC between 2004 and 2006.

The Northern Development Initiative Trust (NDI), the Southern Interior Development Initiative Trust (SIDIT) and the North Island-Coast Development Initiative Trust (now called Island Coastal Economic Trust, ICET) received a total of $285 million in start-up funding from the Province. The funds were to be used to support economic development in their respective rural areas. These trust were to use local and provincial government representatives to make investment decisions in their regions.

NDI received a significantly higher initial funding and has since turned it into even more. After the sale of BC Rail and due in part to the economic impacts of the sale primarily affecting the northern two thirds of the Province, $135 million was provided to NDI in 2005 to begin their work in northern economic development initiatives. In 2006 SIDIT and ICET were established and each was provided $50 million. At this time a further $50 million was added to the account of NDI making the total available for the North, $185 million.

The region NDI serves is vastly greater than the two Southern Trusts. While the SIDIT serves the Southeast area of BC; Kootenays, Okanagan and Columbia-Shuswap, NDI address both the Northeast, Northwest, Haida Gwaii and everywhere virtually north of Kamloops. The Islands Trust, ICET, serves only Vancouver Island and the Sunshine Coast regions.

The Auditors report details how NDI has not followed all the rules of the legislative Act ie; not preparing a timely strategic plan, setting and following strategic goals and failing to have the finances independently audited.

This however is countered by NDI improving their balance sheet.

Beginning with the $185 million they now have a bank balance of $190 million after loaning over $25 million and granting over $60 million. By contrast the SIDIT has granted substantially less, just under $7 million and loaned out just over $21 million while lowering their remaining principal by $1 million. The ICET has substantially reduced their Principal bank balance (approximately a third) from $50 million to $33 million today after granting just over $30 million. The ICET was not able to provide to the Auditor General the amount they had loaned by the time the report was published.

In summary the NDI, starting with a larger fund, increased the size of the fund after loaning and granting much more than the others while serving an area much larger.

The foundation of the Trust Act is described in the Auditors report;

The three statutory trusts were set up to give regional communities the “funding, control and ability to identify and pursue new opportunities for stimulating sustainable economic growth and job creation in their regions.”

The statutory trusts decide how best to allocate their funds through local decision making. According to those we interviewed at all three statutory trusts, decision making at the local level is a significant benefit of the statutory trust governance models. The statutory trusts have contributed to improved regional relations among the individual regional advisory committee members, who are also elected representatives of their communities. For instance, when committee members assess a proposed project, they consider the implications for their region as a whole and commonly consult with colleagues from other communities within their region. Interviewees at the statutory trusts all told us that they see themselves as being a catalyst for projects that might otherwise not have materialized, or that would have been only partially funded.

RESPONSE TO THE AUDITORS REPORT BY NDI (Direct from the Auditors report found here)

Northern Development appreciates the efforts of the Office of the Auditor General of British Columbia in their audit of Northern Development in accordance with section 11 (6) of the Auditor General Act and thanks your staff for their diligent work.

The Northern Development Initiative Trust is an independent regional economic development corporation focused on stimulating economic diversification and job creation in central and northern British Columbia. As such, Northern Development recognizes feedback from all stakeholders as important to the future of the Trust. This audit report, while not binding on Northern Development’s activities, provides useful insight that will aid in Northern Development’s public reporting.

Northern Development will endeavor to implement the three main recommendations contained in the report. At the same time, Northern Development recognizes that it is not bound to follow these suggestions. Stakeholder responses to Northern Development’s implementation of these recommendations will ultimately determine their long-term impact, whether or not Northern Development will continue to follow them, and to what degree they are implemented. Northern Development does consider the BC Reporting Principles to be a helpful guide to public reporting, and is appreciative of the feedback that the Office of the Auditor General provided.

Northern Development’s responses to the three recommendations contained in the Office of the Auditor General’s report are:

1. Northern Development will include discussion in its annual report about how it is complying with legislation. This involves some references to the legislation in the body of the report, and a more detailed analysis of investment by legislated area.

2. Northern Development will incorporate relevant elements of the BC Reporting Principles into its 2011 Annual Report, and test stakeholder responses to the format revisions to aid in development of the 2012 Annual Report.

3. Northern Development has goals developed by stakeholders prominently featured in its annual report. These goals can be reported with a year over year comparison, actual to target comparison, and with some discussion of key performance indicators.

Northern Development appreciates the report’s inclusion of ‘good practices now followed.’ In addition, we would like to point out some additional areas of excellence in practice that were not highlighted in the review. Northern Development’s highly effective funding delivery has seen the disbursement of $88 million toward 929 approved projects valued at $103.8 million, and leveraging over $1 billion over a period of six years since operations commenced.

Northern Development has done this while maintaining a balance of investments and community loans of $192 million, which is more than the original $185 million deposit from the Province of British Columbia, and with annual operating costs of roughly .82% of this capital balance. There are comprehensive project management, internal audit and financial business systems in place. Our stakeholder survey results have verified a 99% overall approval rating for our programs, client service and business practices. Northern Development has also participated in several audits and reviews over the past eighteen months, generating very positive results, and always welcomes feedback from all stakeholders.

Since the Auditor General audit was conducted, Northern Development has proceeded with implementation of the three main recommendations. This includes the addition of a year over year comparison and comparison of target and actual to more of the statistical analysis contained in Northern Development’s annual report. Northern Development has also developed a comprehensive work plan document as part of its strategic plan that includes a three year forecast on measurable performance numbers, aiding in the reporting of key performance indicators.

In conclusion, Northern Development believes that the Auditor General’s report provides another perspective that will help shape our future public reports.

Evan Saugstad, Chair

Go Direct to NDI’s website here