WorksafeNB plagued by poor governance, lack of oversight, auditor general finds

New Brunswick's compensation system for injured workers has been plagued by poor governance and a lack of oversight, says Auditor General Kim MacPherson.

MacPherson's audit, released Tuesday, says the Gallant government and the board of WorksafeNB itself have "weakened" the provincial agency's independence from government in a way that drove up costs passed on to employers.

She zeroes in on Dorine Pirie, who was appointed board chair of Worksafe, a Crown corporation, in 2015. Pirie's position was made full-time, contrary to provincial law that says it's a part-time position. She was paid a full salary.

The audit says Pirie, a former senior civil servant at the Department of Post-Secondary Education, Training and Labour, was shifted into the job because the department was trying to reduce the number of assistant deputy ministers.

But the department continued to pay her salary during her first year with Worksafe, MacPherson says.

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In March 2016, Worksafe took over her salary and expenses, a cost it had to pass on to employers who pay premiums to fund the accident compensation system.

The cost of the full-time position reached $150,000, three times what it had been when there was a part-time chair, MacPherson says.

Pirie claimed $10,000 in mileage in 2016 for driving between her home in Fredericton and the Worksafe head office in Saint John four days a week.

"We asked WorksafeNB management, the board chair and senior officials with the Department why a full-time civil servant was appointed and WorksafeNB was paying a full-time salary," MacPherson writes. "We did not receive a complete, consistent response."

Because Pirie's previous departmental job involved injured-worker issues, her appointment "represented a threat to WorksafeNB's independence. It was possible the Department could influence WorksafeNB operations through the board chair."

The audit says the chair position was posted publicly, but the government ignored the list of applicants and appointed Pirie directly.

New WorkSafe CEO Doug Jones told CBC News last month that Pirie has left the position and the chair's position has been returned to a part-time role.

Premiums raised to $1.70 this year

Pirie was chair last year when Worksafe changed its policy on premiums. Business owners had complained about a large increase in 2017, and then-minister Donald Arseneault declared, "I do not want to see that happen again."

To avoid a second large increase, the board lowered the amount of money needed in the accident fund to cover potential claims. That also increased the risk of a shortfall in the fund.

Pirie said last fall the board's decision was not the result of political pressure.

MacPherson told MLAs that Pirie is "a highly respected career public servant" and the audit's findings were not a criticism of her.

We are taking prompt action to implement all proposed recommendations and we are committed to a path of accelerated improvement.- Douglas Jones, WorksafeNBCEO

Instead, she said, the decision to make her job full-time was one of many factors that raised questions about how Worksafe was governed during "a significant point in time for this organization."

Employers pay premiums into Worksafe's accident fund to cover treatment and salaries of workers injured on the job.

Starting in 2015, a new Workers Compensation Appeal Tribunal began overturning Worksafe decisions, in some cases forcing them to pay higher premiums to more workers.

That drove up costs, prompting the board to raise premiums from $1.11 to $1.48 in 2017 and to $1.70 this year. Employers complained, though MacPherson's audit points out the rate is below a 2004 peak and lower than those in Nova Scotia and Newfoundland and Labrador.

17 months without CEO

At the same time, the organization went 17 months without a permanent CEO. MacPherson said it was not a good time "to not have strong governance" in place.

A new CEO, Douglas Jones, took over in March. In a statement Tuesday morning, Jones and acting board chair Haley Flaro said they welcomed "a fresh set of eyes" examining the Crown corporation's operations.

"We take these recommendations very seriously and we are working in partnership with the Department of Post-Secondary Education, Training and Labour to advance several of the recommendations that will require a joint effort," the statement said.

"We are taking prompt action to implement all proposed recommendations and we are committed to a path of accelerated improvement."

MacPherson's audit looks only at Worksafe's governance. She said a subsequent audit later this year will look at how it handles compensation claims.

Her other findings about the Crown corporation's governance include:

• The delay in recruiting a new CEO "hampered" the board's ability to make decisions for four months.
• The delay cost $150,000 in legal and backfill costs while the previous CEO was on administrative leave.
• External consultants made two attempts to recruit a new CEO, costing $129,000. Part of the reason was that the government took too long to approve the first recommendation, and the candidate took another job during the wait.
• The delay prevented Worksafe from making "significant decisions, such as making changes to the organizational structure."
• Some Worksafe board members collected per diem payments for attending meetings of committees of which they were not members.
• The CEO's salary was 40 per cent higher than provincial deputy ministers, and enjoyed a more generous vacation, health and government car package.
• Senior staff claimed meal and mileage expenses that were more generous than what most provincial public employees claim.