Mr. Speaker, your Standing Committee on Government Operations is pleased to provide its report on the review of the 2021/2022 Public Accounts.
Mr. Speaker, I move, seconded by the Member for Thebacha, that Committee Report 6719(2), Standing Committee on Government Operations Report on the Review of the 2021/2022 Public Accounts be deemed read and printed in Hansard in its entirety. Thank you, Mr. Speaker.
Thank you, Member for Yellowknife North. The motion is in order. To the motion.
Question.
Question has been called. All those in favour? All those opposed? Any abstentions? The motion is carried. The committee report is deemed read.
Carried
In December 2022, the Standing Committee on Government Operations (Committee) publicly reviewed the 2021-22 Public Accounts. The Public Accounts are the financial statements that show the financial results of the Government of the Northwest Territories (GNWT) for a given year.
To address key issues identified in the review and by the Office of the Auditor General, Committee developed four recommendations to:
- Enhance reporting on the health sustainability plan;
- Evaluate and improve health governance;
- Reduce lapses of grants and contributions; and
- Require more detailed reporting from crown corporations.
This report also reiterates ten previous recommendations that the government has not implemented and includes observations regarding rising net debt, unauthorized spending at departments, and the revised Fiscal Responsibility Policy.
The Public Accounts are financial statements that show the financial results of the Government of the Northwest Territories (GNWT) for a given year.
Each year, the Standing Committee on Government Operations (Committee) reviews the Public Accounts. These reviews assess the credibility of the government’s financial position and provide accountability for the government’s financial results. Put differently, these reviews matter because they ask whether public money was spent prudently and as intended by the Legislative Assembly.
In November 2022, the Minister of Finance released the 2021-22 Public Accounts. These were the fourth and final Public Accounts that Committee reviewed during the 19th Assembly. Within weeks, on December 5, 2022, Committee held the public portion of its review.
Committee invited officials from the Office of the Auditor General (OAG) and the Office of the Comptroller General (CG) to identify and clarify key issues. This public review was the earliest in at least twenty years. This timing meant Committee could review the 2021-22 Public Accounts ahead of the 2023-24 Main Estimates, in January, making the review more relevant and supporting more transparent public finances. Committee appreciates the OAG’s and the Comptroller General’s collaboration to move up this review. Committee encourages the 20th Assembly to continue and improve upon this practice.
In recent years, the Comptroller General has brought incremental improvements to the Public Accounts. The changes are most noticeable in the financial highlights section, which now provide more details on variances. These changes have both been self-initiated by the Comptroller General and in response to recommendations from Committee.
However, many other recommendations from Committee in the 19th Assembly to enhance fiscal reporting and transparency are still outstanding. Outstanding recommendations include:
1. Classify the Stanton Legacy Project as a public-private partnership (P3);
2. Enhance reporting on contingent liabilities, including identifying individual claims above a certain threshold;
3. Quantify and disclose each cost driver of the operating deficit at the Northwest Territories Health and Social Services Authority (NTHSSA);
4. Enhance reporting on the Environmental Liabilities Dashboard;
5. Enhance reporting on resource revenues;
6. Add reporting on tangible capital assets with zero book value;
7. Move up the deadline for the Public Accounts;
8. Publish in-year fiscal reports each quarter;
9. Digitize the Public Accounts;
10. Add program-level spending information to the Public Accounts.
Officials from the OAG have said that many of these proposed changes have merit, though may take time to implement. Committee stands by these recommendations and encourages the 20th Assembly to continue advocating for these changes.
In the six years since the NTHSSA was created, its accumulated deficit has almost quadrupled to $194 million. Committee has expressed alarm at the size and persistence of the operating deficit. Last year, Committee recommended more transparency in this area. We asked that the government quantify and disclose each cost driver of the NTHSSA’s operating deficit. This kind of break down – for example, showing the total cost of unbudgeted overtime or of locum staff across the entire health authority – is not available in the NTHSSA’s annual report, its financial statements, or in the Public Accounts.
In its February 2023 response, the government said it knows the significant deficit drivers and listed each one, but stopped short of divulging dollar figures to each driver. Committee is not clear whether the government truly knows the cost of each deficit driver at a system level. The government should be more forthcoming in this area. The government’s response also emphasized the role of the Health and Social Services Systems Sustainability Plan (Sustainability Plan) to manage cost growth and find efficiencies. However, reporting in the department’s business plan, its annual report, and in the NTHSSA’s annual report provide only limited information about the targets, progress, and achievements of the Sustainability Plan. Committee expects more transparency and accountability. The Legislative Assembly and the public need to be able to scrutinize whether Sustainability Plan is delivering improvements to contain costs and improve health services. A public briefing on the Plan in August 2023, which is included in Appendix A, was a good opportunity to promote accountability. This information should be more accessible to all residents and updated on a regular basis.
Committee therefore recommends:
Recommendation 1: That the Government of the Northwest Territories enhance reporting on the Northwest Territories Health and Social Services System Sustainability Plan, including measures, targets, timelines, financial outcomes, and other outcomes related to quality and operational efficiency.
Committee’s concerns about the NTHSSA’s performance extend beyond the accumulated deficit. For example, last year the OAG reported that “many areas of internal controls needed improvement” at the NTHSSA and issued a management letter to this effect.
The Northwest Territories Health and Social Services Leadership Council (Leadership Council) plays an important role in holding the health authority to account. The Leadership Council’s role is “to oversee the management and affairs of NTHSSA and to take reasonable steps to ensure that NTHSSA achieves its legislated mandate.” This responsibility goes as far as appointing and replacing the NTHSSA’s CEO as needed.
The depth, breadth, and persistence of performance issues at the NTHSSA raise questions of whether the Leadership Council has the tools, information, and supports to ensure accountability. Committee is also under the impression that the key players in the NTHSSA’s governance framework – the Minister, the Department, the NTHSSA, the Leadership Council, and the Regional Wellness Councils – are not clear on their roles and how they relate to one another. Regional Wellness Councils do not appear to be empowered to meaningfully participate within the governance structure.
With these concerns in mind, Committee recommends:
Recommendation 2: That the Minister of Health and Social Services commission a review and evaluation of governance at the Northwest Territories Health and Social Services Authority (NTHSSA) since amalgamation. The review should focus on the Leadership Council’s responsibility to oversee the NTHSSA’s performance, including strategy development and risk management oversight, as well as the role of the Regional Wellness Councils. The review should be led by an independent body, such as the Internal Audit Bureau or an external audit group.
The Public Accounts allow the Legislative Assembly to scrutinize the government’s budget implementation. This scrutiny helps hold the government accountable for delivering the programs, services, and investments it committed to in the budget.
There are two significant areas of “lapsed” spending – where the government appropriated money through the budget process but did not spend the full amount by the end of the year. The first area is in capital expenditures. In 2021-22, the government appropriated $476 million to acquire tangible capital assets but only spent $261 million.18 The remaining $215 million, or 45% of the budgeted amount, was left unspent. Committee is waiting to see whether the government’s new capital budgeting approach – which caps the departmental portion of capital spending at $260 million – will make the capital budget more achievable.
The second significant area for lapsed spending was in grants and contributions (Gs and Cs). Gs and Cs are allocations to other individuals, organizations, businesses, or levels of government. They allow the government to deliver various services and support initiatives without providing the services itself.
In 2021-22, the government left millions of dollars unspent for key Gs and Cs.20 For example: Three funds for Indigenous Governments to support addictions recovery, aftercare, and on the land healing left $1.1 million unspent, over 40% of its $2.8 million budget. The Low Carbon Economy Leadership Fund, which supports the 2030 NWT Climate Change Strategic Framework, left $5.4 million unspent, or 60% of its budget.
Several reasons can contribute to allocated funds going unspent: inefficient planning, project delays, lengthy procurement process, onerous administrative requirements, or changing priorities, among others. In any case, when the Legislative Assembly authorizes spending on Gs and Cs, it expects those funds to be spent and to deliver results for residents. When significant amounts are left unspent, it is unclear whether the government can deliver results in those funding areas. More work is needed to ensure effective budget implementation of grants and contributions.
Committee therefore recommends:
Recommendation 3: That the Government of the Northwest Territories identify challenges and take steps to improve the distribution of budgeted funds for grants and contributions.
The Public Accounts are an important tool to promote transparency of the public sector. However, not all government entities have the same reporting requirements in the Public Accounts. Departments’ reporting requirements in Section II of the Public Accounts surpass in many ways those of most boards, agencies, and crown corporations. Certain entities, notably the Northwest Territories Power Corporation (NTPC), do not report at all in the Public Accounts on a non-consolidated basis. While NTPC does separately release audited financial statements, this disclosure misses various categories of information that must be disclosed by departments. The federal Public Accounts Committee recently reviewed this issue and recommended that the federal government study enhanced spending disclosure from crown corporations in the Public Accounts. Committee believes this idea has merit and is relevant to the Northwest Territories.
Committee therefore recommends:
Recommendation 4: That the Government of the Northwest Territories consider requiring all Crown Corporations, boards, and agencies to divulge all expenditures in the same manner as territorial departments in Section II of the Public Accounts. The government should consult with stakeholders on how this change could be achieved, its advantages, and the potential administrative burden, and report back to Committee on the matter.
In the year up to March 2022, the government’s net debt grew by 2.5%, reaching $1.37 billion. The net debt is approaching the federally-imposed borrowing limit of $1.80 billion. It is even closer to the territorial debt cushion in the Fiscal Responsibility Policy, which basically limits net debt to $1.68 billion. The Auditor General observed that the government “will need to take action in the future to rebalance its finances.” Committee is concerned by the fiscal constraints outlined in the Public Accounts, which do not include the fiscal impacts of the 2023 wildfire season. Committee is disappointed that one of the government’s primary responses to the territory’s fiscal challenges – the Government Renewal Initiative – has not delivered substantive results to improve budgeting in the 19th Assembly.
Four departments collectively spent $10 million in funds that the Legislative Assembly did not authorize. Those departments, and their unauthorized amounts, include:
- The Department of Municipal and Community Affairs ($5.1 million);
- The Department of Environment and Natural Resources ($3.1 million);
- The Department of Justice ($1.2 million); and
- The Department of Finance ($0.8 million).
Over-expenditures of this nature contravene the Financial Administration Act (FAA). However, the FAA also allows the Comptroller General to “deem” these overexpenditures as a “supplementary appropriation”.
Committee asked officials from the OAG about the appropriateness of these overexpenditures and the practice of “deeming”. The OAG found the government’s explanation for these overexpenditures to be “reasonable” but noted that neither the Yukon nor Nunavut allow “deeming”.
Last year, the Minister of Finance invited Regular Members to provide input on revising the Fiscal Responsibility Policy. The Fiscal Responsibility Policy guides the government’s debt management. The government was recommending seven changes to improve the policy.
In November 2022, the Standing Committee on Accountability and Oversight provided feedback on the seven recommendations, as well as 14 additional, detailed comments on how the government could further improve the Fiscal Responsibility Policy. These comments sought to align the Northwest Territories’ fiscal approach with international best practices on fiscal rules and had implications for the Public Accounts.
In April 2023, the government released the revised Fiscal Responsibility Policy. 27 Committee was disappointed that the revised policy did not incorporate any of the additional comments. This input has been included as in Appendix B of this report. Committee hopes it will be considered by the Minister of Finance in the 20th Assembly.
This concludes the Standing Committee on Government Operations’ Report on the Review of the 2021-22 Public Accounts. Typically, Committee includes a recommendation in each report requesting a response from government within 120 days. The recommendation is then moved as a motion in the House and Cabinet is required to respond. However, since the 19th Legislative Assembly will dissolve in less than 120 days, Committee has decided to leave out this recommendation and requests that the government provide a public response to this report, even of a preliminary nature, before the beginning of the 20th Assembly.
Reports of standing and special committees. Member for Yellowknife North.
Mr. Speaker, I move, seconded by the Member for Thebacha, that Committee Report 6719(2), Standing Committee on Government Operations Report on the Review of the 2021/2022 Public Accounts, be received and adopted by the Assembly. Thank you, Mr. Speaker.
Thank you, Member for Yellowknife North. The motion is in order. To the motion.
Question.
Question has been called. All those in favour? All those opposed? Any abstentions? The motion is carried. The committee report has been received and adopted by the Assembly.
Carried
Reports of standing and special committees. Member for Yellowknife North.
