N.B. auditor general highlights lack of public accountability in latest performance audit

In her latest report, New Brunswick’s auditor general Kim Adair-MacPherson has raised concerns over NB Power’s management of its debt, provincial oversight of an electronic medical record program and the province’s failure to address the demand for nursing home beds.

The report also broaches the AG’s lack of access to the third-party manager of the province’s public sector pension plan.

“In reflecting on the key findings in this volume, the troubling theme is lack of public accountability,” Adair-MacPherson wrote in the introduction to the performance audit.

Reflecting that theme is NB Power’s failure to meet legislated targets for debt reduction. The provincial utility is carrying $4.9 billion in debt, with additional capital expenditures of between $3 billion and $4 billion planned in the coming years.

The Electricity Act requires that the utility reduce its debt-to-equity ratio to 80 per cent, but it has remained at an average of 94 per cent, the highest of comparable utilities in the country. According to the report, NB Power would need to reduce net debt by $65 million a year in order to reach the 2027 target, but has only reduced debt by an average of $20 million a year since 2013.

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Adair-MacPherson notes that the province is ultimately responsible for NB Power’s debt, posing a risk to the provincial credit rating, as the utility has been unable to meet income targets repeatedly.

“If this continues, NB Power may not have the ability to generate enough income to sustain its growing debt obligations,” the report says.

The chapter on the department of health’s electronic medical record program highlights major concerns over how $26 million in public funds were spent over the last eight years as the program failed to achieve its goal of digitizing health records to make them more easily accessible for physicians and patients alike. Less than half of eligible physicians in the province have adopted the system.

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According to the report, the province pursued a single-vendor model to implement the program, despite the lack of a business case to do so. The department of health then consistently failed to perform oversight of the program.

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“The department did not carry out basic monitoring tasks such as reviewing financial records of funding recipients to ensure funds were used for their intended purposes,” says the report.

“When deviations from funding terms occurred, the department failed to hold funding recipients accountable. In many cases the department did not enforce clauses concerning claw back of unused funds.”

Adair-MacPherson says there were clear signs that the program was in trouble as early as 2015, but it continued until 2019 when it was cancelled.

“We were unable to find valid reasons why the department continued spending money on a program obviously destined for failure,” she wrote.

The auditor general also followed up on the 2016 nursing homes report and found some troubling signs, also highlighted by the department of health in its recent pre-consultation healthcare report.

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As of March 2020, the waitlist for nursing home beds stands at 700 people, with over half currently sitting in hospital.

“In my view, the province is failing to address the nursing home capacity demand,” Adair-MacPherson says.

“Given such delays the province is not ready for the increase in seniors requiring placement in a residential facility.”

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Progress on recommendations laid out in the 2016 report has been sluggish, Adair-MacPherson says, with delays in implementation on plans to address current issues. The department of social development also has yet to study if there is an economic benefit to using a for-profit model of facility over the traditional model.

Adair-MacPherson is also raising concerns over her office’s lack of access to information from the third-party administrator of the province’s public pension plan.

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Vestcor is responsible for the management of the New Brunswick Public Service Pension Plan and the Teachers Pension plan, totalling over $18 billion. Vestcor disagreed that it should have to fork over the requested information due to the legislation that handed the responsibility of managing public pension plans to the company.

“As a result, over $18 billion in New Brunswick public sector funds is not subject to independent and publicly accountable oversight by the legislative assembly,” Adair-MacPherson said.

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The predecessor to Vestcor, the New Brunswick Investment Management Corp., had given the auditor general complete access to records.

According to the report, the auditor general’s office planned to look into Vestcor’s performance as well as its incentive program. The report notes that over the last 10 years, Vestcor has paid out $30 million in bonuses, which have increased close to 500 per cent since 2010. It also says that five senior executives have been paid close to $19 million in bonuses and salary since 2014.

Adair-MacPherson is recommending that the Auditor General Act be amended to give her access to Vestcor and that the company be required to appear before the public accounts committee yearly.

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