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Nova Scotia auditor general releases financial audit report

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WATCH: Nova Scotia’s auditor general released a report on his financial audit of the provincial government and its organizations to the House of Assembly. Alicia Draus has more. – Oct 29, 2019

Nova Scotia’s auditor general released a report on his financial audit of the provincial government and its organizations to the House of Assembly on Tuesday.

In his report, auditor general Michael Pickup found several significant weaknesses in the province’s financial management methods, encouraged Nova Scotia to continue investing in cybersecurity and drew attention to fraud risks within the government and its organizations.

Financial audit

In his report, Pickup identified several government departments and Crown corporations in which his audit found significant weaknesses involving processes, policies and procedures intended to manage finances. The auditor general singled out the Department of Service Nova Scotia and Internal Services, the Department of Lands and Forestry, Housing Nova Scotia, the IWK Health Centre, Nova Scotia Gaming Corporation and the Nova Scotia Health Authority.

However, the report states, the most significant financial-control weaknesses were found at the Department of Lands and Forestry. The auditor general’s findings led him to begin a performance audit of the department and its management of contaminated sites, the results of which will be available to legislature in spring 2020.

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READ MORE: N.S. auditor general says province has failed to implement recommendations

According to the report, the department’s assessment of contamination at the province’s abandoned mine sites is not adequate and risks both unknown financial exposure and unaddressed human health concerns.

This is also the first year the auditor’s report drew specific attention to the department’s accounting methods for cleanup costs at the province’s contaminated sites.

“Nova Scotians should understand that while the accounting for estimated costs relating to cleaning up the province’s contaminated sites is correct, these amounts could change significantly as government performs more site assessments,” Pickup said in a media release.

Finances from public accounts

Pickup’s report also highlighted the results of his financial audit, which looked into the province’s ability to maintain existing services and increase revenues or debt-borrowing within its economy as well as the province’s reliance on revenues outside its control.

The report states that over the last 10 years, the net debt of the province has increased by $2.7 billion, with $200 million of this increase occurring over the past five years. According to the auditor general, future governments are left with the responsibility of managing this debt as they make revenue and expenditure-related decisions.

READ MORE: N.S. auditor general report examines shortcomings of 3 government departments, boards

Of the province’s $12 billion in annual revenue, the report states that about one-third comes from the federal government. This rate of federal funding has remained relatively constant over the last 10 years.

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Moreover, the province’s expenses increased by $2.5 billion, or 28 per cent, compared to 10 years ago, though it is delivering services to roughly the same population, as the number of Nova Scotians has increased by only three per cent, according to the report.

Annual revenues are also up 28 per cent from 10 years ago. According to the report, this growth is mainly from increased personal income tax and HST revenues.

“While financial indicators of the province show improvement over the last five years, the province continues to pay on average $742 million in interest on long-term debt annually, totalling $7.4 billion over the past 10 years,” said Pickup.

Cybersecurity and fraud risk management

In his report, the auditor general says important work in the province’s cybersecurity risk-management program is yet to be completed.

“The development of a robust cybersecurity risk-management program is critically important to the province given that most of its operations are dependent on IT,” Pickup said.

The report states that government departments and organizations are not managing fraud risks quickly enough. Overall, too many fraud risk assessments are not completed, leaving uncertainty around fraud risk, according to the report.

READ MORE: Nova Scotia’s ‘failure’ to carry out due diligence on FOIPOP website led to data breach — reports

For example, 47 per cent of government departments and 43 per cent of government organizations have not completed fraud risk assessments, the report found.

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Government organizations are also not assessing the risks related to the use of purchasing cards, according to the report.

Purchasing cards (PCards) are government credit cards used by employees to make work-related purchases. PCard balances are paid directly by the province without cardholders having to initially provide purchasing support, such as receipts and invoices. As a result, Pickup says PCards present a risk for misuse by employees.

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According to the report, one out of eight surveyed organizations using PCards has not implemented a purchasing card policy. Moreover, four out of eight government organizations, including the Nova Scotia Municipal Finance Corporation, have not assessed the risks of using purchasing cards, the report found.

“Government is spending almost $12 billion per year and, therefore, needs to act more quickly to ensure it is managing its fraud risks,” Pickup said.

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