New Brunswick’s auditor general is reigniting a dispute with the an independent public sector asset manager responsible for investing on behalf of pension plans jointly sponsored by Crown corporations.
In a report, Paul Martin, the province’s auditor general, expressed concerns that Vestcor Investment Management Corp., which provides administration services for 11 public sector pension plans and nine public sector clients, has declined to provide information requested by his office.
“As a result, Vestcor’s accountability to government, the Legislative Assembly and the public remains a significant concern for our office. This is especially so considering the significant amount of funds from public resources Vestcor manages, as well as its extensive government-entity client base.”
Read: Economic, geopolitical factors causing inflationary uncertainty for institutional investors: report
The institutional investor’s position is that it can’t provide information that isn’t available in the public domain. According to John Sinclair, president and chief executive officer of Vestcor, the organization is accountable to the pension plans it represents, not to the province.
“We’re a private not-for-profit corporation controlled by its independent member organizations, the New Brunswick Public Service Pension Plan and the New Brunswick Teachers’ Pension Plan. Our independence was specifically designated through the Vestcor Act,” says Sinclair.
He also notes that his organization is willing to provide information to the auditor general when it’s deemed appropriate.
“We have a services contract which includes everything you’d expect in a service contract. We disclose our information to the clients. We’ve also appeared before the public accounts committee and are happy to answer any information about our publicly available information,” he says.
Read: Vestcor Corp. returns 11.76% in 2019, updates pension admin system
This isn’t the first time Vestcor’s status as an independent entity responsible for Crown funds has caused concern during audits. In 2021, the previous auditor general released a report saying Vestcor had restricted her access to information required to perform her duties auditing Crown agencies. It also included several recommendations for how similar situations could be avoided in the future. In the latest report, Martin revealed Vestcor hadn’t responded to the recommendations.
“Our office has not received any further response or an implementation timeline for our recommendations made in the February 2021 chapter regarding access to Vestcor. What isn’t mentioned is that Vestcor published a statement clarifying its position in response to the report.
“Our analysis and advice have indicated that the auditor general should be much more limited with respect to access to Vestcor related information than what had been requested and we, therefore, have had to respectfully decline these requests to ensure we can continue to fulfill our contractual and other commitments to our clients.”
Prior to 2016, the entity was a Crown corporation known as the New Brunswick Investment Management Corp. That year, it was given its independence as part of a general restructuring of the province’s public sector pension system, which moved it away from a traditional defined benefit model and toward a shared-risk model.
Read: How have Canada’s DB pensions changed over the last decade?
“Through legislation, Vestcor is not an agent of the Crown and was established to operate independently of government,” noted Martin in the latest report. “The office of the comptroller understands that there is no plan to change legislation to allow the auditor general unrestricted access to Vestcor.”
While no ongoing efforts are underway to change the rules, one N.B. legislator sought to pass a bill to require Vestcor to open its books during the previous parliamentary session. Bill 39, put forward by Liberal Rob McKee didn’t move beyond its first reading.
In a statement responding to the auditor general’s latest report, McKee referred to recent revelations that the company had phased in one bonus structure before phasing out a second bonus structure for its employees in 2021. As a result, separate bonus payments of $5.9 million and $2.7 million were released for the same period.
“The exorbitant amounts of bonus pay given to senior employees is a major reason why the auditor general should have the authority to analyze Vestcor’s operations.”
According to Sinclair, the bonuses aren’t being paid out twice. Rather, Vestcor is simply moving between two systems.
“As outlined in our annual report, the legacy long-term incentive plan component has some previously granted long-term incentives that are rolling off as planned, while the new system begins a deferral period based on the 2021 performance. This isn’t an overlap, but a transition period.”
Read: N.B. public service pension plan returns 1.75% in 2018, led by private equity