Report to the Legislative Assembly of the Northwest Territories on Termination Compensation to Two Senior Officials

Government did not act prudently, says Auditor General

Yellowknife, 23 October 2002 — The Auditor General of Canada, Sheila Fraser, today submitted a report to the Legislative Assembly of the Northwest Territories that concluded that the government did not act prudently or reasonably in handling the termination compensation of two senior officials last year.

The report, requested by the Legislative Assembly, examined the process and approvals that led to the termination compensation of two senior officials in the Premier's Office: John Bayly, Principal Secretary, and Lynda Sorensen, Chief of Staff. Specifically, the Auditor General sought to determine if the government's policies and practices were followed and whether the compensation the two officials received was consistent with their employment agreements.

"We found no justification for paying more than the employment agreements provided for. In doing so, the Government of the Northwest Territories did not act reasonably and prudently in this case," said Ms Fraser.

The cost to the government to terminate the employment of Bayly and Sorensen was approximately $680,000 – $280,000 for Bayly and $400,000 for Sorensen. The Auditor General found that the government had no justification for paying the two officials about $256,000 more than the amounts provided for in their original employment agreements – $6,000 more in Bayly's case and $250,000 more in Sorensen's.

Both employees had "at pleasure" appointments with the GNWT that could be terminated by the employer at any time, with or without cause. Both employees had employment agreements with the GNWT signed in 2000 that set out how severance amounts payable were to be calculated should employment be terminated.

In November 2001, the government entered into a new agreement with Bayly and Sorensen that set out different termination arrangements from those in the employment agreements, without justification. The new agreements continue their status as employees beyond the date on which they ceased to provide any services to the employer. As a result, Bayly continued to receive his full salary and benefits, including pensionable time, for one year after ceasing to provide any services to the government; and Sorensen continued to receive her full salary and benefits, with pensionable time, for two years.

The Auditor General was also concerned about other benefits provided in the termination agreements, that is, performance pay, removal assistance, and pension benefits.

While the two terminated employees had legal counsel to advise them and protect their interests, the officials of the GNWT entered into the two termination agreements without seeking legal advice to protect the government's interests.

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