Part of a forensic auditor’s report filed to the Muskrat Falls Inquiry speaks to an estimate on costs held by the project’s management team and Nalcor Energy executives, higher than the approved budget for the hydroelectric project.
It’s a case of monitoring of risks, including costs that have not materialized. For example, added cost for additional clearing at the Muskrat Falls reservoir.
Grant Thornton’s auditing team has noted that in May 2018, the Nalcor project team had a “forecast final cost” in hand of $10.5 billion - $400 million higher than the $10.1-billion capital cost “authorized for expenditure” by the board of directors.
The provincial government and people of Newfoundland and Labrador have tracked the project by the number shared. And that is the amount “authorized for expenditure” by the board.
In June 2018 for example, despite the project team’s estimates, Nalcor Energy president and CEO Stan Marshall gave a public update saying the Muskrat Falls Project is expected to cost $12.7 billion, including a $10.1-billion capital cost plus financing costs.
It’s what the board of directors, including Marshall, have set as the reviewed and approved budget.
There are many reasons there might be differences between a “forecast final cost” held by the project team and the subsequent “authorization for expenditure” from a company’s board of directors, including differences in assessment of whether or not risks are likely to materialize as real costs. Unfortunately, in the case of the Muskrat Falls project, the amount approved as the project budget has gone up and up in the past, tending to continually catch up with the project team’s assessments in hand.
Grant Thornton auditor Scott Shaffer has tracked the differences over time in his report, charting them on one page. He notes six points where the estimates of the project team and Nalcor Energy executive for the project were more than the estimate approved by the board. For example, in July 2013, the team’s “forecast final cost” was seven-billion in capital. The amount approved by the board at that time was $6.2 billion.
But The Telegram has been told Nalcor Energy’s approved project estimate is not changing. It remains at $10.1 billion ($12.7 billion including financing).
A spokeswoman for the Crown corporation said there is also no project update currently planned. Barring unforeseen issues, or poor outcomes, the budget stands.