A Cape Breton-based employment services organization mismanaged more than $1 million in government funds in what Nova Scotia’s auditor general says was a “perfect storm” of deliberate, systemic actions that benefited select managers and staff.
Kim Adair’s audit of the Island Employment Association found numerous instances of “gross mismanagement of public funds,” including about $340,000 in transactions that involved alleged conflicts of interest.
“Some senior managers at the agency engaged in inappropriate business practices which resulted in substantial unapproved payments for extra compensation, vacation and overtime payouts, employee bonuses, double dipping and travel claims,” Adair told reporters Tuesday after she released the audit. Those actions violated employment contracts and policies, she added.
Some of the mismanagement Adair’s office uncovered included $162,000 in unapproved salary payments and bonuses, $150,000 in unused and unapproved vacation time, $74,000 in over-budget furniture purchases and $20,000 in unauthorized travel expenses.
The report says the organization’s executive director, along with some management and staff, “engaged in unethical and unprofessional behaviour.” The board of directors, meanwhile, failed in its fiduciary responsibilities “due to poor governing practices.”
The audit also says the province’s Department of Labour didn’t provide sufficient oversight of the organization and “did not take appropriate action to protect the public interest.”
The matter is now being investigated by the Cape Breton Regional Police. Adair’s report did not name the managers and staff she accuses of mismanaging funds.
Nova Scotia’s Labour Department provided $9.84 million to the Island Employment Association via Nova Scotia Works between 2016 and 2021. But Adair says her office “could not find any clear assessment” supporting the decisions to renew the organization’s funding over that period.
The report also found that the province did not appropriately investigate three complaints about the association, one of 16 such third-party services providers. The complaints came from whistleblower employees who subsequently lost their jobs when the province pulled the agency’s funding in 2021.
Both Adair and Labour Minister Jill Balser thanked the whistleblowers for coming forward with their initial complaints, but a union leader said Tuesday those words offer little comfort.
Nova Scotia Government Employees Union President Sandra Mullen said the union advocated for the province to conduct an audit of Island Employment and hold accountable those directly responsible for the misconduct.
“However, government chose to terminate funding to the agency, leaving more than 30 honest, hardworking people without jobs,” she said in a statement.
“The message this sends to future employees who are aware of gross financial misconduct is to say nothing or risk losing their jobs.”
Adair noted that the employees were not employed by the government, as Island Employment was a contracted service.
Balser said she couldn’t speak to decisions made before she became minister in 2021. She said the government “acted swiftly” to end the funding after Nova Scotia’s ombudsperson in September 2021 released a report containing similar allegations to the auditor general’s audit.
“At the time, some questioned our decision to end our funding agreement,” she told reporters. “I hope now, with the auditor general’s detailed report of findings, this decision is better understood.”
The auditor general’s office recommended that the province assess how Nova Scotia Works programs are delivered, including by determining if program objectives have been established and are being met, and by evaluating risks of outsourcing programs.
Balser says the department has accepted the auditor general’s recommendations and has already started implementing some of them, including requiring providers to submit detailed financial information, and mandating external auditors to conduct periodic reviews.
Adair’s report said that “with 16 third-party service providers … it is critically important for (the Labour Department) to evaluate and monitor whether these organizations warrant entrusting them with annually over $22.8 million of taxpayers’ dollars.”
This report by The Canadian Press was first published June 20, 2023.
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