Casinos - An Audit Scope too Narrow

July 25, 2005

Casinos - An Audit Scope too Narrow

The Auditor General is an independent officer of the legislature. The only control government has over the Office of the Auditor General is in setting the budget for the Office, but it is up to the Auditor to determine how that money will be used. That makes the narrow scope chosen by the Auditor in his recent report on casinos sufficiently troubling that he deserves criticism usually reserved for the government; by narrowing the scope of his audit so as to exclude policy issues, it is as if he were following the government's direction.

The Auditor's report, titled "Keeping the Decks Clean: Managing Gaming Integrity Risks in Casinos", asked four questions:

Does government adequately ensure that casino industry participants meet high standards of honesty?
Does government adequately ensure that casino gaming equipment operates fairly?
Does government adequately ensure that casino gaming activities are conducted honestly?
Does government adequately ensure that it receives its correct share of casino gaming revenue?

The report ignored questions concerning responsible gambling, referral to gambling addiction programs, enforcement of the self-exclusion program and marketing. He should have asked whether the switch from traditional slot machines to VLTs in most casinos has affected addiction. He should have asked whether digital recognition technology that can be used to identify known cheaters is also being applied to the self-exclusion program. (To its credit the BC Lottery Corporation mentioned self-exclusion in its response to the Auditor's recommendation on casino surveillance.) He should have asked whether casinos are tracking regular players who make frequent trips to the bank machines, which are an unfortunate part of most casinos, so as to offer counsel on responsible play. The Auditor chose to ignore important policy issues and confined his audit to whether government is managing "gaming integrity risks" in casinos. The introduction to the report states:

"Three potentially significant consequences exist for government if it fails to adequately ensure gaming integrity in casinos:

Unsavoury elements (e.g., organized crime and dishonest individuals) may become involved in the industry posing a threat to patrons and increasing the level of crime.

A large number of patrons may lose confidence in the industry and stop visiting casinos leading to a significant reduction in government revenues.

Government may not receive all the revenue to which it, is entitled.

The purpose of our audit was to assess whether the government is adequately managing gaming integrity risks in casinos."

Heaven forbid if "a large number of patrons … stop visiting casinos leading to a significant reduction in government revenues". What if an increasing number of patrons become problem gamblers resulting in an increase in gambling related suicides? What if BC is replicating Ontario's experience where a study found that 30% of casino revenues are derived from problem gamblers, less than 5% of all gamblers? Doesn't the Auditor General have a responsibility to include those issues in his audit?

Consider other reports issued by the Office of the Auditor General. In his February 2005 report titled "Building Momentum for Results-Based Management", the Auditor wrote:

"I undertook to study the efforts of the government and its ministries to manage for results because I believe this approach is simply good management practice. Managing for results requires that organizations plan, monitor, measure and report on their performance on a regular basis. These processes, if followed, will improve the quality of information reported by ministries and support more meaningful discussions about the choices governments make and the decisions they take. And when such information is made available to the public, the public itself becomes better informed and better able to judge how its government has performed."

The Auditor didn't confine the scope of that audit to whether the government is minimizing costs and maximizing revenue. Consider the October 2004 report from the Auditor titled "Salmon Forever: An Assessment of the Provincial Role is Sustaining Wild Salmon". In that report the Auditor wrote:

"The purpose of policy is to provide a broad framework for a shared vision to guide decisions and activities. Canada's policy on salmon and salmon aquaculture should set clear objectives for managing both wild and farmed salmon and the interactions between them. At the federal level, Fisheries and Oceans Canada has been struggling since 2000 to finalize a wild salmon policy designed to conserve the genetic diversity of wild salmon and protect their habitat. Stakeholders have called for the policy to be finalized to clarify how conservation should be implemented and how fisheries should be managed. At the provincial level, British Columbia does not have a clear vision and an overarching strategy for wild salmon sustainability."

"Two of our three audits noted gaps in policy implementation. Fisheries and Oceans Canada, for example, has never reported on the status of fish habitat conservation in Canada or assessed the effectiveness of its Habitat Policy. These continue to be significant challenges for the Department. Similarly, reporting by provincial ministries and agencies in British Columbia on performance relating to sustaining wild salmon is weak."

The audit on wild salmon got to the point: "British Columbia does not have a clear vision and an overarching strategy for wild salmon sustainability". The report will be a challenge for Barry Penner, BC's new Minister of the Environment, who has responsibility for wild salmon. The report did not limit its scope to a review of the costs of operating a branch of a ministry and whether government was maximizing revenue.

Other reports from the Auditor could be reviewed, but they would make the same point. The Auditor has considerable choice when he sets the scope of his review. He chose to limit the scope of his review of casinos to the benefit of a government that is bent on a rapid expansion of gambling. It is not simply a question of whether the Auditor criticizes government or not; it is a question of whether his reports are sufficiently comprehensive so as to achieve the full responsibilities of his office in the same way he seeks to have government ministries "manage for results".