Department To Improve Governance and Controls Systems

The Department of Finance is improving its financial management policies and processes.

A project that will help improve internal management systems and reduce risks related to financial and investment transactions was launched in response to recommendations of an audit on internal governance and controls.

The department commissioned Deloitte Touche LLP in early 2004 to review the policies and processes in three divisions that handle major financial transactions for the province: -- liability management and treasury services, where financial transactions are conducted to borrow money and manage the province's debt; -- investment management, where investments are made to fund the major government pension plans; and -- capital markets administration, where transactions are processed for the above two areas.

Deloitte's final report, Results of an Audit of Governance and Control Framework, was received by the department on Monday, Nov. 29. Finance Minister Peter Christie said the audit provides specific recommendations that will help the department continue to implement the best possible internal systems.

"We take these recommendations very seriously, and we intend to start implementing them right away," Mr. Christie said today, Dec. 1. "Our financial performance has been strong. This project will help us enhance the way we manage risk in future."

Compared to previous years, Nova Scotia's debt servicing costs are now significantly lower and more stable. At the same time, investment performance of the province's pension plans has been equal to or better than plans in the rest of Canada.

However, the report found that compared to best practices, some of the department's internal operating procedures and controls are insufficient. It said more robust governance and control systems are needed to minimize the risks associated with financial activities.

The department will implement the Deloitte recommendations, in three key areas:

• A new division will be created to provide day-to-day controls for financial transactions. In industry terms, this is known as a "middle office";
• Operating policies and procedures will be formalized or revised, as needed, and communicated among staff to ensure they are effectively used;
• Governance structures will be amended. Both the debt management committee and the investment advisory committee will see changes in mandate and structure.

The executive summary of Deloitte's report is available on the website at www.gov.ns.ca/finance/ . Copies of the full report are available from the department.