Spring 2011 Report

The auditor general says in his spring report, today, May 18, that inadequate policies, processes, controls and documentation of the Industrial Expansion Fund (IEF), constitute "an inappropriate way to manage public funds." The funds are allocated to businesses by Cabinet.

"There is no assurance that IEF management considered potential investments in a fair and consistent manner before recommending them to Cabinet," said Auditor General Jacques Lapointe.

The eight-chapter report is the auditor general's first of 2011. It cites the government for poor management and accountability in not following through on past recommendations from his office, explains escalating costs of the new Colchester Regional Hospital, suggests the program to replace long-term care facilities could have been more competitive, says public safety is compromised by inadequate fire safety inspections and recommends tighter controls at the Registry of Motor Vehicles.

In contrast to the Industrial Expansion Fund, the auditor general said the business assistance programs administered by Nova Scotia Business Inc. (NSBI) are, for the most part, well-managed, with sound and consistent policies, processes, controls and documentation.

Over the last five years, Cabinet has approved almost $396 million in various forms of financial support to businesses from IEF, while NSBI provided about $210 million.

He said an outside committee established to advise government on IEF investments has no authority or oversight role, and cited an example in which the concerns of the committee were given little mention in a recommendation that Cabinet approve assistance.

Mr. Lapointe said the government's record in implementing recommendations from his office remains poor. Barely half the recommendations made between 2005 and 2008 have been put into effect.

"The Department of Education received the greatest criticism for essentially ignoring our recommendations, implementing only 14 per cent," said Mr. Lapointe.

"Health and Wellness was also at the low end at 36 per cent. Together, Health and Wellness and Education account for almost 60 per cent of government spending. In contrast, Community Services' implementation rate is 75 per cent."

Mr. Lapointe said three submissions to Cabinet for funding the new Colchester Regional Hospital understated the true costs, including the current $184-million budget.

He said "the amounts initially submitted by the Health and Wellness Department and the Colchester East Hants Health Authority were based on assumptions that were unreasonable or unsupported," and were therefore "meaningless for planning purposes."

The auditor general said inadequate consideration has been given to the cost of operating the new hospital which, at 384,000 square feet, is more than 100,000 square feet larger than the hospital it replaces. The Health and Wellness Department has said that, since it is a replacement facility, there are to be no additional operating costs for the new hospital.

The report also notes that the flawed process may deliver a facility that is not as efficient as it could be. Design decisions were often made without adequate regard for costs.

While commenting favourably on the overall management of the program by Health and Wellness to approve and build new long-term care facilities, the auditor general found significant issues with the process for replacement facilities. He said there is no support to show that facilities most in need of replacement received top priority.

Also, because it has no written contractual agreements, and therefore no termination provisions, with existing long-term care providers who operate the majority of facilities, the department felt it had to negotiate for replacements with those companies. This meant those contracts, valued at $2.3 billion over the next 25 years, were not opened to a competitive process. Mr. Lapointe said he does not accept the validity of this argument.

The auditor general said public safety is compromised by the inadequate management of the fire safety inspection program of the provincial Office of the Fire Marshal. His audit found 47 per cent of required inspections sampled were not completed, and there was little evidence that deficiencies found during inspections were corrected. The Office of the Fire Marshal is also not fulfilling its oversight responsibility for municipal fire safety inspection programs.

"Among the facilities that are not being adequately inspected are hospitals, schools, nursing homes, day cares, jails, group homes, theatres and other buildings where people gather," said Mr. Lapointe.

Two chapters in the report deal with the Registry of Motor Vehicles and its weaknesses in protecting private information and in ensuring unsafe drivers and unsafe vehicles are kept off the road.

The audit found that the registry is not enforcing deadlines for drivers who need to provide required medical assessments and, as a result, drivers with health conditions that could impair their ability to operate a car safely may continue to drive.

"The registry needs stronger controls over the information it manages, to prevent such offences as credit card fraud, identity theft and fraudulently obtained licences."

The full report and related documents are available online at www.oag-ns.ca .