Columnists John Ivison of the National Post writes a good explanation (subscription required)  of what I’ve dubbed the Liberal Party government’s “FoundationGate” scandal.  This is the newest scandal revealed by our good Auditor-General, Sheila Fraser.

Ivison describes it as “a laundering scheme that allows the Finance Minister of the day to get excess cash off the books at year-end,” but frankly, I worry it has shades of sponsorgate (the current Liberal gov’t sponsorship corruption inquiry) painted within the ugly picture. 

Where is the money being spent?  Is it being directed to more Liberal Party-friendly people and firms?  Why is most of it unspent?  What are/were the Liberals planning on doing with all those billions of our tax dollars that the Liberals funneled into these foundations over the past few years? 

One of the huge problems is that they’ve structured this colossus so that the foundations aren’t subject to public scrutiny the way most government is.  It’s our money!  Right out of our pockets!  What are they up to? 

We need answers.

Picture this: you are a senior official in the federal Department of Health responsible for liaising with Canada Health Infoway, the non-profit foundation set up by the government to introduce new technology to the health sector. When it was established in 2001, you were delighted when it was granted $500-million from the federal purse to help ensure common health information standards across the land.

Imagine your surprise when the Finance Minister awarded the foundation a further $600-million in his next budget, even though the first tranche of cash had not been spent and you hadn’t asked for any further funding. Surprise turned to embarrassment the next year when Canada Health Infoway was handed another $100-million.

By last April, the foundation had been awarded $1.2-billion, but had only provided $51-million in grants to third parties. It spent $30-million on administration but, on the bright side, it earned $83-million in interest payments, meaning the balance in its account was $1.202-billion—more than it started with.

The level of inactivity could be career-limiting but the happy news for you, as a federal official in the sponsoring department, is that it has nothing to do with you. Foundations are arm’s-length creatures and, once the money has been transferred from federal coffers, what they do with it is their business. Even more fortuitously, no one outside of the foundation really knows what is going on because there is very little accountability. Sure, they are required to provide a financial audit from an external auditor, but what does a financial audit of a corporation that is apparently moribund tell anyone? The Auditor-General and her tiresome performance reviews hold no sway here, so life can go on pretty much undisturbed.

Welcome to the wonderful world of foundations—a laundering scheme that allows the Finance Minister of the day to get excess cash off the books at year-end, so that grasping provinces, whining interest groups and those dreary taxpayers can’t point to a bulging surplus and complain that they are more deserving of the funds. In much the same way as the Finance Minister pads each department with generous contingency funds that are never used, foundations provide the government with plausible deniability when the provinces and others come calling, because as soon as the money is transferred, it is written off as an expense.

The sums are staggering. The Auditor-General, in a report released yesterday, noted that between 1996 and 2004, $9-billion was received by the foundations she examined. Of that, $2.9- billion was provided in grants to third parties involved in everything from genomics research to feasibility studies on improving air quality. In that time, $1.7- billion was earned in interest, which meant that by last April, $7.6-million of predominantly taxpayers’ money (the interest is the property of the foundation) was sitting in bank accounts.

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