Auditor General Releases Report

Jacques Lapointe, auditor general of Nova Scotia, released his first report to the House of Assembly today, July 26.

The report includes 11 chapters which summarize the audit work completed by the Auditor General's Office during the first half of 2006. Mr. Lapointe assumed his position on March 1, 2006 so the report is transitional; the audits were selected and begun prior to his arrival.

The auditor general reports that he reviewed the government's revenue estimates included in the 2006-07 budget tabled on May 9, and that his report included a reservation of opinion based on two factors: a scope limitation resulting from insufficient access to information; and a qualification related to inadequate compliance with generally accepted accounting principles.

He also notes that a number of compliance issues will need to be resolved with respect to the currently ongoing audit of the government's March 31 consolidated financial statements and that forecast information indicates that additional appropriations will need to be approved for 2005-06.

In his report he makes the point that control assessments by his office and other auditors in recent years have identified significant weaknesses in controls over the government's core financial management systems. Such weaknesses can expose the systems to various forms of error and potential abuse. In addition, he notes that the projected cost of the SAP human resources module has increased from $5.7 to $24.5 million.

An audit at the Department of Community Services identified serious weaknesses in controls over certain aspects of information technology and financial systems. These weaknesses expose the department to potential errors and financial loss.

The Nova Scotia Research and Innovation Trust was established by the province to provide funds for research infrastructure. An audit of the trust identified a need for improvements in accountability for funds paid out.

Three chapters deal with audits of entities which deliver educational programs: the Atlantic Provinces Special Education Authority; Conseil scolaire acadien provincial and Strait Regional School Board.

The report notes that the Atlantic Province's Special Education Authority board needs to improve its governance practices, and analyze its current service delivery model, to ensure that programs and services are delivered efficiently.

While most audit findings at Conseil scolaire acadien provincial were favourable, some weaknesses were found in student transportation and in control over school-based funds. The auditor general recommends that the Department of Education, Conseil scolaire acadien provincial and regional school boards make an effort to share services in order to achieve greater economy and efficiency, while still maintaining the focus on its cultural mandate.

Audit findings in areas examined at the Strait Regional School Board were, for the most part, favourable. However, the auditor general made a number of recommendations to improve operations and reduce costs, particularly in the area of student transportation.

Two chapters relate to the health sector. The first, an audit of three district health authorities (Colchester/East Hants, Cumberland and Pictou County), focused on financial processes. The auditor general concluded overall that financial management processes were adequate. However, he recommended that the Department of Health and Executive Council begin approving business plans and funding levels for the district health authorities prior to the start of the fiscal year, as required by legislation; the 2005-06 business plans for these health authorities were approved eight months or more into the year. Such late approvals cause uncertainty about the amount of revenue to be received by the health authorities and complicate financial management.

Also in the health sector, an audit of payments to physicians examined alternative funding arrangements. Since the last audit in 2000, weaknesses in accountability have not been remedied, while this form of funding has grown considerably, to 45 per cent of physicians and $178 million in 2004-05. While the Labour Relations Committee of Executive Council recently approved a proposed framework negotiated by the Department of Health and Doctors Nova Scotia which incorporates improved accountability practices, no alternative funding agreements have yet been signed under the new framework.

Finally, in a review of sustainable timber supply at the Department of Natural Resources, the auditor general highlighted the lack of regular, comprehensive public reporting on the state of the forests and sustainable forestry in Nova Scotia.

Management responses received by the auditor general indicate that action is being taken or planned to address many of the report's recommendations.

The auditor general stresses that some of the findings in the report may have broader applicability beyond the particular entities where the issues emerged. For example, weak control of school-based funds may be a concern at most school boards; and weaknesses in computer access and security may be common in large government systems. He also notes that governing boards of agencies may need to review their accountability practices to ensure that the CEO's responsibilities are clear and that he/she is held accountable to the board for meeting organizational objectives and plans.

The full June 2006 Report of the Auditor General is available on the auditor general's website at www.gov.ns.ca/audg/ or by contacting the Office of the Auditor General at 902-424-5907 or [email protected] . The auditor general plans to issue his next report in December 2006. It will include the results of audits completed during the second half of 2006.