GN should centralize accounting jobs, AG says

The Auditor General of Canada, Sheila Fraser, took aim at the Government of Nunavut’s most untouchable sacred cow, its decentralized administration, in a blistering report on Nunavut’s financial system that recommends the “recentralization” of financial management jobs.

Fraser said in her report, tabled this past Tuesday in the legislative assembly, that the Nunavut government’s financial management system is sick and rapid, decisive action is needed to fix it.

“Six years after Nunavut’s creation, I am surprised at how slowly financial management has improved,” Fraser said in her report.

She said the GN’s current financial management system is “weak and fragile,” leaving the government open to “error, bad decisions, or fraud.”

That includes a “history of breaking the rules,” especially in the late delivery of financial statements and reports, and in the spending of money before the spending is approved by the legislative assembly. Under Nunavut’s Financial Administration Act that’s illegal.

To fix the mess, she said the government must abandon its slow, step-by-step attempts to fine-tune its existing financial systems and make bold, sweeping changes aimed at dealing with the root causes of its financial management screw-ups.

“The easiest course is to make changes within existing systems. This has been tried for six years, with very limited success. We do not think it will work,” Fraser’s report said.

Instead, Fraser said, the GN should change its financial management system altogether.

To do this, she said the GN must centralize its widely scattered financial management workers in one of two ways: under one big roof, or within larger work groups, but fewer in number, located throughout Nunavut.

She said that to function properly, the GN’s decentralized accounting structure needs a higher proportion of experienced professional accountants. But the GN does not have enough professional accountants, and she said there’s no sign of that changing soon.

Fraser also said that, depending on how a centralized accounting system is created, it could conflict with the GN’s decentralization policy.

“But this need not be the case,” Fraser said.

She said recentralization of accounting functions would provide better training for beneficiaries, because in larger work groups, supervisors would have more time to spend with trainees.

“For several reasons we are concerned that on-the-job training may not be effective in Nunavut’s decentralized accounting structure,” the report said.

That’s because the GN’s small number of qualified accounting staff are carrying workloads that don’t give them enough time to train others. As well, many supervisory staff are themselves untrained: unfamiliar with various laws, and lacking the knowledge they need to do their jobs well.

Plus, the report said, a centralized accounting system could free up money for use in other areas, such as housing or coping with higher fuel prices.

She also said a centralized system would require fewer financial workers, which would allow the GN to hire more staff to actually deliver programs to people.

As well as recommend that the GN develop a centralized accounting system, Fraser also recommended that the government:

close gaps in its accounting systems; and
develop training programs that will give beneficiaries the opportunity to become professional accountants and prepare for senior financial management jobs.
Some of the financial management problems highlighted in her report included the following:

Despite past warnings from the auditor general, the GN has violated the Financial Administration Act by spending money before the legislative assembly has approved the spending. Between 1999 and 2004, they broke their own law consistently.
Despite past warnings from the auditor general, the GN’s financial management is still so weak “the government does not yet have basic financial controls.”
Despite past warnings from the auditor general, the GN is failing to deliver reports and financial statements on time. For example, the GN’s consolidated financial statements for 2003-04 weren’t tabled until December, 2005 — 20 months after they were due.
Though the GN is now a $1 billion-a-year organization, many of its financial systems are not computerized.
David Simailak, Nunavut’s finance minister, said this past Tuesday that he will provide “details” on “many initiatives” aimed at fixing the GN’s financial management system.