N.S. auditor general to file police complaint against provincial Liberal Party

Nova Scotia's Auditor General Kim Adair is planning to file a formal complaint with the RCMP over what she suspects was an attempt by the Liberal Party of Nova Scotia to hide or delay disclosing an employee had misused party funds.

"During the later stages of readying this report in 2024, our office became aware of concerning information pertaining to the association's handling of the misuse of funds," noted Adair in her latest report, which was released Tuesday.

"The information reveals an indication the association sought to conceal and delay disclosing the misuse of funds until after the 2021 provincial election."

At a news conference on Tuesday, Adair declined to say how her office got that information or who provided it.

"Given that we are going to the RCMP, I don't want to jeopardize anything that is going to happen from this day forward," she told reporters.

"But as it stated [in the report] that there was information that came at the late stages in 2024, as we were writing the report, that made it evident, based on our evidence that we have, that there is, and there was an apparent concealment of the misuse of funds until after the 2021 provincial election."

Liberal Party association says report is wrong

Responding to Adair in an emailed statement on Tuesday afternoon, Joseph Khoury, past president of the Nova Scotia Liberal Party Association, said the allegations are "irresponsible and inaccurate." 

Khoury said the party responded to the loss of funds immediately, sought legal advice and hired a forensic investigator to examine party records, but that work took time.

"Any insinuation by the auditor general that this independent investigation conducted by Deloitte was purposely misrepresented as part of a political calculation is baseless and needlessly inflammatory," he said.

Liberal leader says he's contacted police

Liberal Leader Zach Churchill told reporters he agreed with Adair that the matter needed to be examined in greater detail and had already contacted police in response to one of her two recommendations.

"I certainly fully support the recommendations that the auditor general has," said Churchill. "I was first provided a brief and read this report on Feb. 13."

"The next day I wrote the RCMP myself, in line with recommendation number one, and urged them to look into this matter further, and certainly our doors will be open if they feel that that's necessary."

Churchill took over the Liberal party from Iain Rankin on July 9, 2022, following the party's stinging loss in the 2021 general election.

Although he has called in police, Churchill quickly tried to distance himself from the allegations of a coverup.

"This is certainly a situation that I have inherited as leader, but we're going to take it very seriously and get to the bottom of it."

As for the party's continued refusal to provide the auditor general material she requested, Churchill told reporters at Province House he was first aware of that when he read a draft of Adair's report.

"My advice to the party was to give the auditor general whatever she was looking for," said Churchill. "They received legal advice that impacted how they approached this.

"I'm not happy with it. I didn't realize this until I read the auditor general's report."

Adair 'can't speak to who knew what'

Churchill said he had little first-hand knowledge of much of what was outlined in the report. 

Former premiers Stephen McNeil and Iain Rankin led the party before Churchill but it's unclear what either of them knew about the misuse of funds or decisions surrounding how to handle the situation.

Adair was unable to determine that during her investigation, saying that she "can't speak to who knew what within the party association."

In her report into thousands of dollars of "questionable transactions" made by a former Liberal party employee, Adair also detailed months of apparent foot dragging by the party to supply her office with the results of an audit and the agreement it reached with the employee it fired for misusing the funds.

By the end of 2021, the employee had reimbursed the party a total of $170,000, representing $112,238 in funds withdrawn without authorization and $62,762 for investigative and legal costs associated with the misuse.

Request should have been fulfilled, report says

According to the auditor general's report, the party repeatedly refused to provide the information she wanted because of a confidentiality agreement it had with the employee, and its view that the audit report and its findings were "privileged" information.

Adair made it clear the Liberal Party should have complied with her request for the information when she first requested it on July 6, 2022.

"We question why the association made an easy-to-fulfill information request a costly endeavour for our office," she wrote.

"Considerable time and resources were spent dealing with this lack of compliance to our access provisions granted under the Auditor General Act and delayed our ability to report on this matter to the House of Assembly."

Adair also took issue with the way the Liberal Party first reported the matter in its 2022 financial statement. She suggested the party was less than forthright by implying there had been a "forensic audit" when, according to Adair, a "forensic audit was not conducted."

Association was aware of misuse of funds: AG

In addition, she criticized the party's claim that "the investigation continued subsequent to release of the 2020 financial statements, and it was discovered that there were more unauthorized disbursements for years prior to 2020."

That implies the association did not know the "unauthorized disbursements" began before 2020 before the party released its financial statements for that year, which they did in April 2021, the report said.

"However, before the release of the 2020 financial statements, the association was aware the misuse of funds was significant and occurred over several years," Adair wrote.

The report noted the RCMP had contacted the party over the unauthorized disbursements, had been told "it was an internal matter that had been resolved and no police action was required," and subsequently decided against proceeding with an investigation in 2023. 

Speaking for his party now, Churchill took a different view.

"I want to get to the bottom of this," said Churchill. "I'm not happy with this situation and certainly if things weren't handled as they should be, we want to make sure that we're dealing with that."

For his part, Premier Tim Houston seemed eager to use the report to paint the official opposition as not ready to govern.

"Very serious situation," said Houston. "Misappropriation of public funds.

"It's a frightening thing for Nova Scotians and it would be hard to imagine that group of people managing billions of dollars."