Follow the Money

September 13th, 2013

The CSA received $255,613,000 in revenue during 2012.  The obvious question is why a domestic electrical regulator is taking more than a quarter billion dollars from taxpayers each year.  But, for now, lets skip that question and instead ask what they’re doing with that quarter billion.

Government entities are required to disclose their annual expenses.  The rules for disclosure vary by province and between provincial entities and federal entities.  These disclosure standards are usually called accountability and transparency regulations.  The CSA of course, is exempted from accountability and transparency standards.  Whereas CSA discloses next to nothing about what they’re doing, most government entities are required to disclose nearly everything they’re up to.

For example, we know that a Mr. Moe Amery, an MLA in Alberta, spent $52.92 of taxpayer dollars on March 22, 2013 for the purchase of “unleaded premium gasoline” from an Imperial Oil station in Red Deer.  The next day, Mr. Amery spent $14.69 on a car wash.  On April 26th, he consumed three bowls of soup at Quynh Vietnamese restaurant for a total cost of $30.29.  Perhaps he likes soup, or perhaps he was dining with two other people.  Probably the latter.  On March 6th, at precisely 12:03PM MST, Mr. Amery’s car was parked for one hour at Impark Lot #4 in Edmonton.  That hour of parking cost $6, including $0.29 in GST.  We know that he eats brown bread, prefers Pepsi over Coke, and sometimes omits bacon at his breakfasts.  We know this because the original invoices for his meals can be publicly reviewed online.  That’s a lot of disclosure, its a lot of detail.  Trust is like confidence, financially it comes from knowing how our dollars are being spent.

In contrast, the CSA claimed expenses during 2011 of over $100 million dollars for something called “Direct.”  We have no idea what this is.  There is no breakdown of “Direct” anywhere in their financial reporting.  That’s an awful lot of ambiguity for an awfully large expenditure.  In the same year the CSA also spent $104,153,000 on “Selling.”  Again, no idea.  There’s no breakdown here either.  And this isn’t a one-off, in 2010 they spent $98,470,000 on “Direct” and another $90,211,000 on “Selling.”  These are millions!  But Mr. Amery spent $73.20 on gasoline on April 11th and we know where he bought it, the kind of fuel he purchased, and what the price was per litre.  To put this in perspective, the CSA could buy Mr. Amery a full tank of gas 1.4 million times with the difference between these two levels of transparency. 

And it gets worse.  In 2010 the CSA reported spending $129,567,000 for something called “internally restricted for specific purposes.”  We don’t know what this is either.  There is no breakdown, nothing to show how this figure is generated.  Its like spending millions of dollars and calling it “other.”  Speaking of which, the CSA claimed $13.5 million dollars worth of “other” in 2012.  But back to “internally restricted for specific purposes,” it could be that, as it sounds, the specifics of the expenses in this category are “restricted” whereas all else is therefore open to review.  But its not.  In this same year the CSA reported spending $14,402,000 on “unrestricted.”  So its not just “internally restricted for specific purposes” thats restricted, apparently expense detail for “unrestricted” is also restricted.  Just like “Direct” and “Selling,” these restricted unrestricted mentions feature regularly in CSA financial reporting.  In 2012 for instance, a full $147,279,000 was recorded as “internally restricted for specific purposes” and $13,731,000 on “unrestricted.” 

It just warms the heart, doesn’t it, to see reporting like that?  Gives you confidence in their integrity?  Well, if P.S. Knight filed tax returns like CSA does, a very warm audit indeed would surely follow.

This is a good time to recall that these dollars CSA is spending come from the taxpayer.  In average figures, he CSA directly receives $5.6 million from government, plus $7 million taken by government sanction from the electrical trade, plus unknown millions in royalties, pre-payments, licensing fees and other euphemisms for protection money, plus unknown millions from government agencies in the form of unaccounted service and secondment transferred in trade for liability protection.  All of this money comes from taxpayers.  That’s you, its your money.

So what else are they doing with your money?  Well, they’ve been using your money to buy “guaranteed investment certificates” and types of “pooled funds” during 2012 at values of $14,802,000 and $117,693,000 respectively.  As a federal regulator however, it is highly inappropriate for CSA to be involving itself, in tens and hundreds of millions of dollars at a time, in buying GICs or, frankly, any other investments. 

What else?  Well, while CSA reporting is decidedly opaque, it seems that CSA employees are being given index-linked pensions.  We’ll never know for sure without FOIP of course, but they do report that “pension payments […] are partially indexed to cost of living increases after retirement.”  This isn’t necessarily a bad thing, but we need to be cautious given that its taxpayer dollars being used, and given CSA’s record of self enrichment.

The CSA has also bought whole companies with your money.  They bought into Solar Test Laboratory Inc., for instance, a photovoltaic testing company.  Presumably CSA bought shares of Solar Test Lab in order to benefit from the coming economic boom in solar technology.  With this acquisition, CSA could win lucrative contracts with outfits like Advent Solar, SV Solar, Signet Solar and OptiSolar.  By 2010 however, each of these were bankrupt (Sunfilm, Signet), closed (OptiSolar), or insolvent and acquired by a third party (Advent).  But some big names could be courted too, like Siemens, Solyndra, Bosch, and Diehl.  Unfortunately, Siemens is more savvy than CSA, they divested from solar in 2012.  And Solyndra ignominiously closed its doors in 2011.  And Bosch “exited” its PV module business in 2013.  And Diehl had to restructure and sell off their solar assets earlier this year.  Twenty-one solar firms closed their doors by the end of 2011, another 46 followed in 2012, and CSA lost 10 more from their market base in 2013, and 2013 isn’t over yet.  If it soothes, one may note that CSA only lost $366,000 of your money on its Solar Test Lab investment last year, and only $328,000 the year before.  So, in review, the CSA used your money to invest in an exotic, risky venture, to serve an industry that was propped up by unsustainable subsidies and, even before the subsidies have ended, the industry has more or less collapsed and CSA’s solar market with it.

While we’re chatting about CSA acquiring things with other people’s money, one should note that they bought a company called Orb Optronix during 2012.  They only paid $5.540 million for this LED testing and “engineering services company.”  They also acquired “100% of the common shares” of IntraTest GmbH in 2011.  And they also acquired Emitel AG and “Mikes Testing Partners GmbH” for a mere $22,344,000.  Mike must be pleased. 

By the end of 2011, CSA had entered a “non-revolving reducing term loan” with its “principal banker” in the value of EURO 16,000,000.  This was to “assist in the acquisition of strategic companies.”  The CSA is a federally chartered regulator, it reports to the Minister of Industry.  In other words, loans like this are ultimately backed by the taxpayer, no matter the political niceties of internal structuring.

The CSA doubled its spending on “interest on borrowings” in the last year, from $292,000 to $463,000.  Remember Moe Amery?  He spent $5 on May 13th for parking.  The CSA spent 92,600 times more than that paying for loans, but we have no idea what they were for.

Through all of this, nowhere in CSA’s reporting is there any documented consideration of whether a public regulator should be using tax dollars to buy any companies.  It seems it never dawned on them that this conduct might be highly inappropriate.

RestoreCSA is committed to recovering CSA as a federal regulatory entity in the service of the Canadian public.  We are working to end the ambiguity in CSA reporting and to introduce accountability and transparency standards to Canadian Standards.  Thank you for your continued support.