Audit takes aim at tobacco buyout

Thursday, November 24, 2011

By SUSAN MANN

About 1,000 tobacco quota holders received a payment under a program designed to address declining product demand but more than half of them weren’t active tobacco producers, according to the fall auditor general’s report.

In 2008 there were 446 active tobacco producers, while in 2009 there were 118 and in 2010 there were 251, it says in the report by John Wiersema, interim auditor general, released Tuesday.

The Ontario Flue-Cured Tobacco Growers’ Marketing Board, which delivered the Tobacco Transition Program to producers on behalf of Agriculture and Agri-Food Canada, paid out a total of $284 million by May 2009. Tobacco quota holders who agreed to leave the industry were paid $1.05 per pound for quota. The Ontario government didn’t contribute funds to the program.

But some farmers who took money to leave the industry then switched their land and equipment to relatives who continued growing tobacco under the new licensing system.

The transition program was created to address the severe decline in demand for flue-cured tobacco from southern Ontario, Canada’s main region for flue-cured tobacco production. Wiersema’s audit revealed two of the three program objectives were achieved while the third objective, which was to facilitate the transition of tobacco producers out of the industry “was not as far advanced,” the report says.

Eliminating the tobacco quota system and improving the viability of remaining and future tobacco farmers were achieved under the program.

Wiersema says the federal agriculture department had to deliver the program within a short time frame and didn’t first conduct a thorough risk analysis. The agreement to implement the program didn’t provide clear terms and conditions to ensure recipients wouldn’t enter into business arrangements that would undermine the intent of the program.

In addition, the department changed its interpretation of what was and wasn’t allowed under the agreement a number of times resulting in confusion for producers. The department was successful in controlling some but not all of the business arrangements that would compromise the program’s intent.

In an email, Agriculture Canada says it is working with the Ontario tobacco board to ensure that they fully implement the recommendations of external audits that were done on behalf of the department. BF