Administrative and executive employees of the Crown corporation responsible for Muskrat Falls received, and continue to receive, thousands of dollars more than equivalent government employees, according to the second half of a report from the Newfoundland and Labrador auditor general.
Nalcor executives were paid up to $271,327 more than equivalent government executives at the top of their pay scale, while managers were paid up to $116,782 more than equivalent government managers, according to the report released Wednesday. .
“We were unable to determine any business reason for this variance,” read the report, which covers the period 2013 to 2018.
According to the report, Nalcor’s executive and managerial positions had the same qualifications of responsibility, problem-solving and knowledge as equivalent government positions, but the corporation’s employees were paid more.
“I am disappointed to see that two positions that are equal, independently assessed as equal, pay significantly differently,” Auditor General Denise Hanrahan said Wednesday, speaking to reporters.
Between 2013 and 2018, Nalcor’s board of directors allowed executives to exceed the top of its pay scale by more than 20% and approved a managerial salary structure with fewer classifications and wider salary ranges, allowing employees to exceed salaries basis by more than 10 percent. penny.
“For context, these changes occurred when provincial government employees were under a wage freeze,” the report said.
In 2018, a year described by then-Finance Minister Tom Osborne as a “difficult phase” for the province’s wallet, Nalcor sent $180.5 million in employee compensation, including $90.9 million for 950 administrative employees, $84.8 million for bargaining unit employees and $4.8 million for 17 executives
The 35 positions examined in the report were paid significantly more than their government counterparts, Hanrahan said. According to the report, the audit included input from a job evaluation consultant who verified that Nalcor and the provincial government used the same job evaluation criteria.
Crown corporations are typically required to pay employees in accordance with job classification and government compensation policies, but Nalcor was exempted from the rule by a government order in council.
“We would expect them to use that waiver prudently, where there was an obvious business need,” he said.
In 2018, the compensation was 63% of Nalcor’s annual operating costs.
108 days of license, car allowance of $12,740
According to the report, each from 2013 to 2018, 15 executive employees received an average of $46,000 incentive payments, while 70 senior managers received an average of $16,000 in lieu of bonuses. Senior managers at the top of their pay scale received about $1.5 million in bonuses.
Nalcor executives and management received a more lucrative bonus package than equivalent government employees, including up to 108 days of paid leave and a $12,740 executive vehicle allowance.
Nalcor employees also received a four percent annual cost-of-living adjustment through 2016. Although general economic increases ceased in 2016, staff still received increases in salary levels, salary scales, bonuses, and incentives.
In 2017, Nalcor’s board of directors approved salary scale changes that increased the ranks for some positions up to $30,000 above the lowest salary hired for the prior year. Later that year, the board approved an additional 14.5 percent increase in salary scales, which took effect in April 2018.
In April 2018, John MacIsaac, Nalcor’s executive vice president of power supply, was paid $440,200 annually, more than double the compensation of comparable positions, according to the report. MacIsaac left Crown Corporation in 2019.
Similarly, Nalcor managers were eligible for annual performance bonuses from 2013 to 2018. During that period, Nalcor spent $1,493,265 in management bonuses. In 2018, Nalcor eliminated bonuses but adopted a new pay scale that allowed management to progress past the top of the pay scale by up to 10 percent, according to the report.
“This change also meant that high-performing workers would have higher pensionable earnings available at retirement, since previously paid bonuses were not pensionable,” the report wrote.
The report also found that base salaries for executives and managers were above industry benchmarks. According to the auditor general, executive salaries were “at the high end” of the Canadian industry range, while management salaries were above Nalcor’s benchmark of the Atlantic electric utility market of Canada.
AG disappointed by lack of change
In a statement, Nalcor CEO Jennifer Williams highlighted several changes to Nalcor’s compensation policies and organizational structure.
“We are committed to fulfilling our legislated mandate while balancing fiscal responsibility,” he said.
In May 2021, following a provincial government council order, Nalcor eliminated incentive payments for senior management and executives. By last month, NL Hydro had reduced executive positions to nine, with salaries for the eight vice presidents ranging from $210,000 to $285,000. Employees now pay higher insurance premiums, while other benefits, such as vehicle allowances, have been changed or eliminated.
However, Hanrahan said there remain “substantial” differences in compensation between Nalcor employees and comparable government positions.
The report recommends that Nalcor reassess its compensation policies and practices to ensure better use of public funds, including alignment with government pay scales. In its response, NL Hydro acknowledges that its policies and practices should ensure the best use of public funds, but does not commit to implementing the recommendation.
Formed in 2007, Nalcor oversaw the Muskrat Falls hydroelectric project, which is billions over budget and years behind schedule. Crown Corporation was incorporated into NL Hydro in 2021, following a lengthy public investigation that concluded in 2020.
In an interview, Industry, Energy and Technology Minister Andrew Parsons said he was not surprised by the report and blamed the previous administration.
“The reality is that the government on duty gave Nalcor and his senior officials free rein. They let them do whatever they wanted, they didn’t control them, and that’s what led to the situations we have,” he said.
Interim PC leader David Brazil has pointed a finger at the current government, saying he wants more checks and balances for Crown corporations like Nalcor.
“People are responsible here. We are going to ask the minister what is the intention here and how are they going to rectify this,” she said.
In October, the first part of the auditor general’s report found that Nalcor consistently overspent on employee and contractor benefits.
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