N.B. auditor report points to closed door spending under the Gallant government

Click to play video: 'N.B auditor report reveals privacy breaches and back door deals'
N.B auditor report reveals privacy breaches and back door deals
WATCH: The Auditor General, Kim MacPherson, says the multi-million dollar bailout for the city of Saint John violated provincial laws. Morganne Campbell reports – Jun 11, 2019

The province’s auditor general released her performance audit of New Brunswick on Tuesday, highlighting a number of reoccurring themes that include privacy breaches and back door deals.

In the report, Auditor General Kim MacPherson, honed in on a funding agreement between Saint John and the province that saw former Premier, Brian Gallant, hand over $22.8 million dollars to the port city without legislative authority and reviewing documentation from the city.

Gallant guaranteed assistance to Saint John in March of 2018 that set a “risky precedent” for the province, which posed a significant financial risk to taxpayers.

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“We believe the agreement circumvented requirements under the Local Governance Act discouraging municipalities from having ongoing operating deficits,” writers MacPherson in her 140 page report.

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“Further, the Treasury Board did not comply with the Financial Administration Act to ensure proper legislative authority through an Environment and Local Government budgetary appropriation before providing funding under the agreement.”

The AG’s office looked at media reports dating back to July 2017 where the mayor of Saint John stated the City was in “crisis” and asked for a “new deal” with the Province to address the City’s challenging financial situation, which was a $6-million dollar deficit in 2018.

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The challenging financial situation was due to population decline, a property tax assessment freeze and reductions in the Province’s unconditional grant to municipalities.

While investigating the agreement, MacPherson found that the former Premier appeared to guarantee assistance to Saint John before obtaining Cabinet approval.

“We reviewed information from various sources, but received no evidence of documented approval by Cabinet supporting the former Premier 2017 apparent guarantee until February 8, 2017,” said MacPherson in the report.

“There was no provision or qualifier in the former Premiers letter indicating his parent guarantee was subject to Cabinet approval, departmental consultation, confirmation of legal appropriation and budget authority,” she added.

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The Auditor General explained in the report that there should have been adequate decision support documentation, such as a business case with detailed financial analysis.

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“We could not identify the exact timeline for each stage of the agreement development,” said MacPherson. “We were surprised to learn there was no provincial analysis to confirm the City’s 3-year anticipated budget deficit.”

MacPherson also found poor record retention of documentation in the Premiers office and recommended the Executive Council Office develop a record retention policy to ensure records are maintained in the Premier’s Office throughout government transitions.

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The report also pointed to the funding agreement as “precedent setting” which creates a risk for the province.

“Providing funding to a municipality to address a projected, ongoing deficit could incite other communities to seek the same solution to financial issues. This precedent would represent additional increased risk for the Province as it faces pressure to address municipal deficits with similar actions,” added MacPherson.

MacPherson is urging the government to modernize the Financial Administration Act.

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