Winter 2012 Report Released

There has been relative stability and some improvement in the province's long-term debt position in recent years, but Nova Scotia continues to carry a higher debt burden per capita, and in relation to GDP, than most similar jurisdictions in Atlantic and western Canada, Nova Scotia's auditor general said.

In his report released today, Jan. 18, Jacques Lapointe said the province's debt is the result, over decades, of governments' decisions to spend more than they took in, raising critical accountability problems as well as ethical questions.

When current spending is financed by future debt, Mr. Lapointe said, spending decisions are divorced from the difficult decisions to raise funds to pay for services and programs.

"Governments that make those spending decisions are not accountable to the Nova Scotians who, in the future, will be required to pay," he said. "This raises ethical questions. Is it right for governments today to decide to spend more than they earn, for their short-term benefits, and defer the costs far into the future? Is it right for Nova Scotians to expect and receive services that they will not pay for, deferring those payments to future generations, who have no say in those decisions?"

The auditor general said there are a few limited and exceptional cases when government can legitimately spend beyond its revenue, such as in times of emergency or disaster, borrowing for large-scale capital projects that could not proceed otherwise, and to maintain services over a short period of economic downturn.

He said risks associated with government debt should be more widely understood, and the ethical questions raised by excessive borrowing and the burden it places on future generations require greater consideration.

The auditor general's report to the legislature on financial matters includes a number of indicators of the sustainability of the province's financial position. Sustainability indicators measure government's ability to maintain programs and services, and meet its obligations to creditors, without increasing debt or raising taxes.

He said the province's debt is a drain on current and future resources, and limits government's ability to make choices about services. Increasing debt can threaten the sustainability of government programs and services.

Nova Scotia's net debt now stands at $12.8 billion, and costs $861 million a year in interest. That's nine cents of every dollar the province takes in. While interest costs have been decreasing as a percentage of revenue, Nova Scotia continues to spend a higher portion of its revenue on debt interest than do most comparable jurisdictions.

Mr. Lapointe also reported on the government's performance in implementing previous financial recommendations from his office. The overall implementation rate of those recommendations stands at 66 per cent, which he said, "in our opinion is still too low, and a number of recommendations have remained outstanding for several years."

One long-standing recommendation is that the province properly consolidate the budget's revenue estimates to include agencies' outside revenues. For years, the government has refused to implement this recommendation, and the auditor general has had to qualify his opinion on the accuracy of the budget's revenue estimates. A consultant hired by the government to resolve the issue recommended adding a schedule as a simple solution.

"We recommend that action be taken in the 2012-13 budget so that we can provide an unqualified opinion on the revenues estimates," said Mr. Lapointe.

Other reporting issues raised by the auditor general include the need for a number of internal control improvements, the need for departmental risk assessments related to financial reporting and ongoing uncorrected accounting and financial reporting deficiencies in agencies, boards and other organizations outside core government.

The full auditor general report is available at www.oag-ns.ca.