AG Blasts Province For Saint John Funding Deal

New Brunswick’s auditor general says the former Liberal government went around provincial laws when agreeing to give Saint John money towards its structural deficit.

That is one of the concerns raised by Kim MacPherson in an audit released Tuesday.

“There’s a section in the Local Governance Act which discourages New Brunswick municipalities from operating ongoing deficits,” said MacPherson.

“Essentially, in this case, Saint John was alleviated by knowing that the province was going to fund the deficit for three years.”

Deal Is ‘Excessive Risk’ To Taxpayers

In February of 2018, the province entered into a funding agreement with the city to provide up to $22.8 million over three years to address Saint John’s anticipated budget deficit.

But MacPherson said the deal did not have legislative authority and then-premier Brian Gallant appeared to guarantee assistance months earlier in a letter to the city before getting cabinet approval.

MacPherson said the agreement constitutes “excessive risk” to taxpayers by not including specific outcomes and failing to address the city’s challenges.

The deal created “inappropriate incentive” for the city to keep running deficits, she said, and set a “risky precedent” for the province.

“Providing funding to a municipality to address a projected ongoing deficit could incite others to seek the same funding,” MacPherson said. “This precedent would represent additional risk for the province.”

Working Committee Report

MacPherson also noted a key working committee report intended to review long-term solutions, which was due on January 1, has not yet been completed.

Delaying the report “could impact the city’s ability to address future financial challenges,” she wrote in her report.

MacPherson also raised concerns about government agreeing to remove two “key” clauses protecting the province’s interests after the city disagreed, including one requiring annual approval from the legislature for the payments.

She also alleged the city “leveraged” the timing of the recent provincial election to gain provincial support, which Mayor Don Darling has denied.

MacPherson made six recommendations to the Executive Council Office, Treasury Board and Comptroller, which include:

• Ensure funding decisions follow due process, are justified, supported, authorized, etc.
• Ensure funding agreements do not effectively override the spirit and intent of legislation.
• Involve all relevant provincial entities.
• Review and update Financial Administration Act.
• Develop a records retention policy for Premier’s Office throughout government transitions.

Potential Obstruction

In her report, MacPherson said they found evidence departments involved did not
provide all documents and communications her office asked for.

She said it was unclear if the findings and conclusion would be different if they had received the information.

“Although this may constitute an obstruction under the Auditor General Act, as at the time of this report, we have not addressed the potential obstruction but may do so at a later date,” MacPherson wrote.