Audit rips New Brunswick’s oversight of ag fairs

New Brunswick’s provincial government plans to update the legislation governing agricultural fair associations, following an audit that criticizes several departments for lack of oversight on the fair organizations.

Given ag fairs’ charitable gaming privileges and exemptions available for property and income taxes, Auditor General Kim MacPherson found “limited provincial processes to monitor compliance” with the associations’ eligibility for those benefits.

MacPherson’s report, released Wednesday, recommended the provincial ag department either fulfill its mandate under the Agricultural Associations Act as it’s now written, or amend the Act and related regulations to “define and clarify (the province’s) commitment to these entities.”

In its response to the audit, the ag department said agricultural fairs and exhibitions are “largely volunteer- and community-based organizations, and lend valued support to (department) priorities such as the promotion of local foods.”

With those roles in mind, the department said it agrees to “amend or repeal all or part of the Agricultural Associations Act, and related regulations” by sometime next year.

During that process, the ag department added, it would work in 2016-17 to come up with an “appropriate process for a regular review of the exhibition associations’ operating status.”

But the ag department, in its response, also said it “contends that if an agricultural association is not incorporated under the Agricultural Associations Act it is not required to comply with the regulations.”

“A lack of action by (the ag department) to address non-compliance allows all parties to continue as they wish, with no regard for legislative requirements and no plan to further the legislated purpose for the existence of these organizations in provincial legislation,” MacPherson wrote in her report.

She said she found the department doesn’t supervise or control the 13 agricultural fair associations in New Brunswick as the Act requires. Moreover, the department believes the existing associations don’t fall under those regulations, and believes the Act and regulations in question are outdated.

However, she noted, these associations are still getting annual grant funding — and the province acknowledges these entities are “the only government-recognized agricultural fairs in the province.”

Plus, the audit found “limited initial assessment to determine if entities are eligible to receive exemptions and benefits” and “a lack of ongoing monitoring to ensure requirements continue to be met.”

The benefits of being an eligible agricultural society or fair association include being exempt from property tax, if property is occupied by the society or fair association “solely for exhibition purposes.”

In 2015, the foregone tax revenue in total from those associations is estimated at over $468,000, based on assessed property values of $12.8 million. The exemption for the associations is part of a larger group of similar exemptions for various New Brunswick organizations totalling about $52 million, MacPherson wrote.

However, the auditor noted, while Service New Brunswick’s standards call for inspections at 10-year intervals, several of the ag association properties are long overdue.

It also noted one fair association, the Exposition regionale du Madawaska, is still listed in the tax-exempted category — even though ag department officials note it hasn’t operated a fair since at least 2011 and no longer gets provincial ag fair grants.

In its response to the auditor, Service New Brunswick said it will set up a new standardized process by year’s end to evaluate eligibility of future requests for property tax exemptions, and start regular monitoring of exempt properties “to ensure their continued eligibility status.”

“A single note”

The audit also found the provincial public safety department doesn’t evaluate or monitor the eligibility of all agricultural fair associations licensed under the Charitable Gaming program, or revisit their eligibility periodically.

The province’s 13 ag fairs took in an estimated $450,000 in gaming revenue in 2014, the auditor noted, of which over $357,000 went to just two associations, Saint John and Miramichi, both of which operate bingo events.

On top of that, the audit found, the evaluation of the Miramichi association’s eligibility for a gaming license consisted of “a single note… stating ‘although this org. is registered as a corporation, they operate as a non-profit agricultural group, therefore, qualify for licensing.'”

The public safety department replied it will, by the end of September, draft a “checklist of criteria to accompany future applications in order to ensure that all (gaming) licences are issued in a consistent manner.”

The audit also found “no monitoring of compliance with agricultural fair association status or not-for-profit status” of these associations for income tax purposes by the provincial finance department.

Relying on the Canada Revenue Agency to oversee these groups’ status, she wrote, “may result in the province providing exemptions and other benefits that agricultural fair associations may not be eligible to receive.”

Once the auditor’s report is made public, the provincial finance department said, it would request the Canada Revenue Agency audit all New Brunswick ag fair associations now exempt from provincial income tax, to “verify the eligibility status of these organizations.”

As for the grant funding available to the associations, the auditor recommended the province resume direct distribution of grants to ag associations, rather than hand them out through a “third-party entity” — a reference to the New Brunswick Association of Agricultural Fairs and Exhibitions (NB Fairs).

The audit found “no current policy or agreement of any sort defining the purpose” of the ag department’s relationship with NB Fairs — nor any standing in the Act for NB Fairs.

Moreover, the auditor wrote, “we believe NB Fairs has an inherent conflict of interest since the entire board of directors is comprised of the currently recognized agricultural societies or fair associations” — and it’s possible any requests by new groups to join NB Fairs would lead to a smaller share of grants for the incumbents.

Besides, the auditor wrote, though NB Fairs’ main role for the ag department appears to be to distribute grant funding to the existing associations, “we could determine no reason for (the department) to rely on NB Fairs to complete this annual process.”

The ag department said it would “formalize and implement a grant allocation process for agricultural fair associations” sometime in 2017 to provide grants directly.

That said, the department noted it would also be able to still support “any third-party entity that plays a valuable role in promoting agriculture and representing New Brunswick in national organizations.” — AGCanada.com Network

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