Saturday, April 21, 2018

Bad books: whither professional behaviour

Today's Globe and Mail has an article by Mattew McClearn I hope those who follow me will read - but it is work and if you're not that invested in the Sousification of Ontario's accounting at least take a couple of minutes to watch the video embedded in Bad books: How Ontario’s new hydro accounting could cost taxpayers billions.
The IESO changed its accounting policies in March 2017 and said the shortfall was an "asset".
The government said this "asset" represented the IESO's right to recover the shortfall -plus interest charges and other expenses -  from future ratepayers years from now.
The Auditor-General says this "asset" does not exist.

Image from Globe and Mail showing Bay Street's seals of approval
I don't wish to dwell on the article beyond recommending you read it, but I will expand on some topics I've touched on before to demonstrate why the article should be read as illustrative of a greater rot.

The "asset" is defined in the Ontario Fair Hydro Plan Act:
Regulatory asset established
25 (1) Effective May 1, 2017, the IESO has the right, exercisable in accordance with this Act and the regulations, to recover the balance recorded in the variance account from specified consumers.
I would suggest the debt being packaged as an asset is essentially the sale of future consumers - and nothing else. The vast majority of Ontario electricity is generated by hydro-electric and nuclear generators that entered commercial more than 24 years ago - and most of the remainder is contracted supply where residual value beyond the contract terms should only be imaginable in disreputable places.
One thing I found fascinating in the article was how reputable anything can be deemed by some accounting firm:
“You can go to any of the public accounting firms and get them to render an opinion on whatever you want,” [forensic accountant Al Rosen] said. “The ethics have gone all to hell.”
McClearn's Globe article displays an abandonment of any pretense of professional behaviour around former banker and current Finance Minister Charles Sousa - either within the finance department or in the broader financial culture he operates within. I want to end with a different type of disappointment displayed at the electricity system operator (the IESO) and attached to another public policy issue.

From the article:
...the IESO decided against adopting rate-regulated accounting when it was formed in 2015 – a decision supported by its auditor, KPMG. And earlier this year, Ms. [Kim] Marshall told the province’s public accounts committee that in February, 2017, she presented financial statements prepared in the usual way to her audit committee.
The following month, though, she produced a fresh set of financial statements using rate-regulated accounting.
It does make me wonder if Ms.Marshall was comfortable with the direction.

The IESO is the renamed IMO which dates back to Ontario's so-called market opening in 2002. It was not "formed" in 2015, as the article states, but that is the year it absorbed the Ontario Power Authority (OPA). The new organization included 2 women who had been Vice-Presidents at the OPA: Kim Marshall and JoAnne Butler.

The IESO had no females in its 2014 Executive Leadership Team.

In October the rookie President and CEO of the IESO, Peter Gregg, announced a re-organization and noted JoAnne Butler had "concluded [her] tenure" at the IESO. Today's Globe article notes, "Ms. Marshall will step down as the IESO’s CFO at the end of this month. (No replacement has been named.)"

And I really do wonder if Ms.Marshall was comfortable with the direction.

Gender diversity is an issue the industry has recognized, but it remains far from clear the IESO leadership will/can meaningfully address it - nor is it clear that's their greatest diversity challenge.


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