Prince Edward Island’s government says an audit of the ill-fated NOFG pork plant shows the “original work” by the previous government on the file led to the plant’s failure.
NOFG (Natural Organic Food Group), a Quebec company, handed the facility’s keys over to the P.E.I. government early this year, after the province called in its $1.5 million loan to the company.
The province then operated the packing plant through a receiver but shut it down in late March when no private-sector buyer came forward. All the plant’s equipment was sold at auction in May.
The estimated total loss to the province on NOFG is $4,303,000, the government said Friday as it publicly released the audit report by provincial Auditor General Colin Younker.
“The loss of taxpayers’ dollars is troubling, but the current government will use the auditor’s observations and recommendations to substantially improve the way public funds are invested in the future,” provincial Treasurer Wes Sheridan said in a release Friday.
Younker’s audit found a “lack of co-ordination by government in providing assistance and monitoring the progress of this project.”
Specifically, the PEI Lending Agency provided some financing to the project, but the ag department was the lead on the file, “even though assisting and monitoring of a manufacturing and processing operation was not considered within its mandate.”
Further complicating any monitoring efforts, “accounting records were not maintained on an ongoing basis and reliable financial reports were not produced,” the report said.
Among its specific criticisms, the report found two consultants and two “non-resident employees” of NOFG, in return for 16 months’ work, drew $442,000 in salaries, $20,000 in bonuses, $234,000 in consulting fees and $348,000 in travel reimbursements.
The former government also allowed “a series of wire transfers and inter-company loans from NOFG PEI” that the auditor general felt violated the company’s loan agreement, the province said.
According to the province, the loans and transfers in question included $499,541 to a holding company owned in part by the Quebec owners of NOFG, part of which was an advance of $345,000 for the company to buy the former Garden Province Meats facility. Another $336,000 was paid to a consulting company owned by NOFG’s president.
Furthermore, the province said Friday, the audit finds that the former Conservative government in P.E.I. “waived” a requirement that the private investors invest $2.8 million in capital improvements for food safety and operational efficiency upgrades.
Changes in the final purchase and sale agreement had a negative affect on the company’s working capital to the tune of $1,423,000, the province said. And less than a week before the last provincial election, an audit by Canadian and U.S. authorities resulted in a notice to delist the NOFG facility and revoke its export license.
“Shortly after taking power, the new government agreed to provide $1.6 million in working capital to allow the plant to operate,” Sheridan said Friday.
“Although we decided to support the plant initially, we also initiated a thorough program of due diligence to examine the viability of the plant and to re-examine the willingness of the Quebec owners to invest their own money into this operation.
“The failure of the owners to meet those commitments — and the poor quality of the original deal — led us to the inescapable conclusion that this plant could not be saved.”
The facility took hogs from across the Maritime provinces and Quebec and marketed their meat under the PEI Natural, PEI Organic and PEI Omega 3 brands.
Premier Robert Ghiz called for the auditor general to investigate the facility in late 2007, saying at the time that the province wished to gain “a thorough understanding of exactly what has taken place at NOFG since taxpayers’ dollars began to flow to that company in 2006.”