OLG audit finds misuse of corporate credit cards, 46 per cent raises, and no comprehensive business case for modernization plans
Furniture. Travel. Sky-high executive pay.
A long-awaited government audit found multiple red flags in the executive suite of the Ontario Lottery and Gaming Corp., from misuse of corporate credit cards to compensation practices out of line with what other public servants make.
The report also found the OLG's plan to funnel more money to provincial coffers by privatizing casinos was plagued by delays, overly optimistic profit forecasts and the lack of a comprehensive business case."
The audit, which was conducted by an internal division of the government and not the independent auditor general's office, stops short of drawing scathing conclusions about the OLG's performance, but it raises serious questions about the value the agency has delivered for taxpayers.
From 2015 to 2018, some OLG executives received raises of between 16 to 46 per cent, far higher than raises of three to 10 per cent at other government-owned corporations, the audit found.
By 2018, then-CEO Stephen Rigby was making $765,000 (he made $797,000 last year before leaving the OLG).
The audit found total executive compensation at the OLG was $11.1 million in 2019, compared to $7.2 million, $6.1 million and $5.2 million, respectively, at Metrolinx, the LCBO and the Workplace Safety and Insurance Board.
In 2019, shortly after the government began the audit, the OLG faced reports in the Toronto Sun of excessive spending on office renovations by Rigby.
The auditors sampled about $260,000 worth of spending on credit cards across the board and found 29 per cent of that was on items such as furniture and travel and did not comply with the OLG's corporate credit card policy - the purchases should have been made through some other means. The audit did not draw any conclusions about Rigby personally.
OLG spokesperson Tony Bitonti told the Star in an email the credit card transactions noted in the audit were found to be legitimate work-related expenses," and that the corporation has implemented recommendations by the auditors to tighten controls in that area.
Bitonti also said current salary ranges were approved by the OLG's board and the government in 2018 and that a third-party review has confirmed these salary ranges fall within market rates for the broader public sector."
He added that executive base salaries have been frozen since 2018 and that the agency is already working on recommendations from the audit.
OLG welcomes independent reviews of its business which contribute to improved operations and enhanced accountability," Bitonti said.
The publication of the audit comes more than two years after the government began its wide-ranging probe of the OLG, a crown corporation that runs the lottery and oversees casinos.
The report noted that while the OLG saw an 82 per cent reduction in staff as it privatized casinos between 2016 and 2019, the number of executives increased by 36 per cent.
Last year, as COVID-19 shutdowns devastated the casino business and thousands of private-sector gambling employees were laid off, the OLG came under fire for continuing to pay executive bonuses. However, the audit did not cover the time period after 2019.
The probe also raised concerns about the OLG's 2012 modernization" plan to reach agreements with private operators to run existing casinos and build new ones.
It concluded the process was marked by delays and that OLG management tended to lean on the side of optimism such as best-case scenario or ideal conditions."
The OLG also failed to develop a comprehensive business case" for modernization after the auditor general said one was required in a 2014 report.
The OLG initially promised modernization would deliver an additional $1.3 billion in profit to the province every year by 2017-18, but later revised that to $889 million starting in 2021-22. Before the pandemic, it delivered about $2.5 billion per year to the province in profit.
Paul Burns, president and CEO of the Canadian Gaming Association, said the audit shows the modernization process was too complex and rigid." It made it hard for private operators to bid on the contracts and hurt the business case for those that did win casino rights, he said, leading to less revenue for the province.
Under new leadership, OLG is implementing a new strategic plan that will deliver on additional growth and continuous improvement," he said. Duncan Hannay, a former banking executive, took over as CEO of the OLG last October.
Our government is supportive of OLG's commitment to improving its operations, enhancing accountability and transparency, and delivering value to the province of Ontario by acting on the audit recommendations," said Ministry of Finance spokesperson Emily Hogeveen.
The two phases of the audit were completed in June and December of 2020 but just posted online earlier this month.
Christine Dobby is a Toronto-based business reporter for the Star. Follow her on Twitter: @christinedobby