Auditor flags millions in write-offs, cancellations

Crown corporations approving write-offs without public scrutiny

Teresa Wright
Published on March 17, 2015

Auditor General Jane MacAdam

©Guardian photo by Heather Taweel

Crown corporations have been cancelling and writing off millions of dollars every year without public scrutiny, according to the 2015 P.E.I. Auditor General Report.

Jane MacAdam conducted a review of write-offs and cancelled debts owed to the province as part of her annual report on the provincial finances.

She flagged problems with the way Crown corporations handle these transactions.

“What we found is that practices have changes,” she told reporters during a news conference Tuesday.

RELATED: Auditor general finds lack of oversight for contaminated sites in P.E.I.

Up until 2005, all debts written-off or cancelled by Crown corporations were fully disclosed in executive council orders, which are published and available to the public.

But sometime after 2005, government lending agencies stopped seeking treasury board or executive council approval.

Without these approvals, the write-offs and cancelled debts are not as accessible to the public and also not included in the auditor general’s annual report, thus not as transparent to the public.

For example, MacAdam flagged the province’s primary lending agency, Finance P.E.I., for writing off a total of $6.5-million since April 2012. This same agency also authorized $3.7-million in cancelled debts owed to the province in 2013-14.

“There was no approval by the Lieutenant Governor in Council for these cancellations,” MacAdam writes in her report.

“These types of cancellations have continued into fiscal 2014-15.”

She notes the province is a significant lender within the Prince Edward Island economy and that loans issued by the provincial government have dramatically increased over the last 10 years.

Between 2004-05 and 2013-14, provincial loans to external parties have ballooned from $228 million to $443 million, an increase of 94 per cent.

MacAdam told reporters Tuesday she did not conduct a full audit of these write-offs and cancelled debts, explaining she felt highlighting the non-transparency of Crown corporation practices would be sufficient to make her point.

“We felt like we didn’t need to perform a full audit to bring it to the department’s attention that they need to clarify the expectations around section 26 of the Financial Administration Act,” MacAdam said.

“We’re just pointing out that if anyone was to read our annual report and think that they were getting the full picture of all the cancellations and write offs, we just want to alert readers that’s not the case.”

In her annual review of the province’s finances, MacAdam presented a dim portrait.

“There’s a continued deterioration in the financial position of the province,” MacAdam said, pointing to the growing net debt and persistent annual deficits.

She noted that although some performance indicators have shown slight improvement over the last year, the overall trend has been concerning.

“One year does not make a trend, so if you look at it over a four-year period… the trend is unfavourable.”

P.E.I.’s net debt increased by $59.4 million in the 2013-14 fiscal year leaving the total net debt now over $2.1 billion.

That means that every man, woman and child in P.E.I. owes $14,349 toward the net debt. This does not include the additional $40 million deficit budgeted for the current fiscal year.

MacAdam also conducted speciation audits of Access P.E.I., management contaminated sites and out-of-province health services.

- She found there were no service level standards at Access P.E.I. and identified I.T. control weaknesses.

- She found Health P.E.I. was not identifying cost-saving opportunities despite the budget for off-Island health services growing 20 per cent over the last two years to $46 million. She further identified a significant amount of out-of-province health claims paid with little scrutiny, noting 50 per cent of claims she reviewed did not have required physician referrals.

- MacAdam found government does not have complete list of contaminated sites in P.E.I., mainly abandoned landfills. Also, the majority of contaminated sites owned by the province have not had environmental site assessments performed. Without these assessments, potential environmental or public safety risks are unknown.