Knowledge is power, auditor general says

Canada’s auditor general, Sheila Fraser, said this week that Nunavut MLAs can’t make good political decisions unless the GN discloses more financial information and recruits enough skilled employees to produce it.

Fraser delivered this message Feb. 5 to the legislative assembly’s standing committee on operations, at a meeting to discuss the auditor general of Canada’s recent report on Nunavut’s public accounts for the 1999-2000 fiscal year.

She told MLAs they can’t make good policy choices about things like building leases, environmental clean-ups, revolving funds and Crown corporations unless they get good financial information.

For example, she said in her report that MLAs do not get a chance to properly scrutinize the GN’s long-term leases for office space and staff housing — because the government does not include that information in capital estimates tabled in the assembly.

“This means that the government could plan more total capital spending (building and leasing) than it can afford, and this fact goes unnoticed,” Fraser said in her report, which committee members had in front of them as they listened to her remarks.

She told them that without financial details, MLAs can’t determine whether it’s better to lease a new building or buy it with cash.

“In some cases, it might be better for the government to lease; in other cases, it may be better to buy. It all depends on the details,” Fraser told MLAs.

The auditor generals report says that as of March 31, 2000, the government had committed itself to making about $476 million in lease payments, mostly for long-term leases of up to 20 years.

The report also says that unaudited information shows that the government committed itself to $145 million worth of new leases that began in 2000-1.

Fifty per cent lease premium?

In one leased project, the auditor general calculated that the cost of the lease to the government is 50 per cent more than it would have cost the government to pay for the building with cash.

“Nevertheless, the government decided to pay the lease premium. The analysis is dated two days before government records indicate that the government wrote to the successful bidder that it had the lease,” her report says.

“Without explicit objectives that clearly say why the government might want to pay this large premium, it is unclear to us why the government decided to lease and not buy.”

She also said that other important factors affecting lease decisions, such as benefits to Inuit, can’t be evaluated without knowledge of financial details.

The Nunavut government leases most of its buildings and staff housing, including the legislative building in Iqaluit, from private developers such as the Nunavut Construction Corporation, Urbco, and Nova.

It’s also planning to have private Inuit birthright development corporations manage the construction and lease-back of new health facilities in Cambridge Bay, Rankin Inlet and Iqaluit.

Bob Vardy, Nunavut’s deputy minister of finance, told committee members his department agrees that projects the government plans to finance through leases should be disclosed in the government’s capital estimates.

Environmental cost-plan needed

Fraser also said the territorial government has no knowledge of its environmental liabilities and should develop a plan to “identify, evaluate and estimate the costs of cleaning up contaminated sites in Nunavut that need to be cleaned up and are the government’s responsibility.”

The government has already told Fraser’s office that it has begun an inventory of contaminated sites in Nunavut and that such a plan will take more than five years to develop.

“I want to be very clear that I am not saying that there are serious environmental issues in Nunavut. I don’t know this. My point is that the new government does not have all the information it needs to answer this important question,” Fraser said.

Another major problem, Fraser said, is that the Nunavut government does not have enough qualified financial managers.

“In my view, the government currently does not have the trained staff it needs to provide good financial management,” Fraser said.

Decentralization jeopardized

She told the committee that the GN’s shortage of experienced financial managers has been aggravated by decentralization, since this has resulted in inexperienced people working without support in the decentralized communities.

“My point here is that the government needs to ensure that it has the people it needs, in all areas, including financial management, to make sure that decentralization plans work,” Fraser said.

She said that there’s intense competition in Canada for trained financial managers, and that even her office “has to fight to recruit and retain the staff needed to do our work.”

Vardy told the committee that the department of finance has already begun to work with Nunavut Arctic College and the department of education to train more Nunavummiut in financial management skills.

But he said the Nunavut government agrees with the auditor general’s critique.

“The concern that the government does not have adequate trained staff to provide good financial management, now, and possibly in the future as some responsibilities are devolved to regional offices, is valid,” Vardy said.

The auditor general’s first report on the Nunavut government’s financial records was produced under the authority of Denis Desautels, who left the auditor general’s job on March 31, 2001.

Fraser was named to replace him soon after.

Iqaluit Centre MLA Hunter Tootoo, chair of the assembly’s operations committee, said this week’s exercise won’t be the last time MLAs will question the government on issues arising from the auditor general’s report.

Readers with Internet access can find PDF copies of the report, in English, Inuktitut and French, at: www.oag-bvg.gc.ca/domino/reports.nsf/html/01nunavut_e.html