Auditor general concerned about fraud on largest project in province's history

Nova Scotia's auditor general is once again sounding the alarm about the threat of fraud.

This time his concern is with the largest project the provincial government has ever undertaken — the $2-billion redevelopment of the QEII Health Sciences Centre.

In his latest report, released Tuesday, Michael Pickup noted: "The lack of attention to fraud risks is concerning to us."

And his office, once again, singled out the Department of Transportation and Infrastructure Renewal for not doing enough to protect itself against possible fraud.

"For a project the size of the QEII New Generation Project, we expected to see a project-specific fraud risk management program which included a fraud policy, code of ethics, fraud risk assessment, fraud awareness training, and processes to ensure ongoing monitoring of fraud risk," said the report.

"However, these have not been completed."

In a report released last October, the AG's office noted the Department of Transportation had one of the lowest rates for completing the province's mandatory fraud training. At the time, only 11 per cent of department employees had completed the online course.

'Strong fraud prevention practices should be in place'

As far as this specific project was concerned, only 11 of the 40 members of the project team had completed that training.

"With an expected budget of approximately $2 billion, strong fraud prevention practices should be in place for the Halifax Infirmary Expansion and the Community Outpatient Centre to safeguard public assets," said Tuesday's report.

"The lack of attention to fraud risks is concerning to us."

Transportation Minister Lloyd Hines said his department also took the risk of fraud seriously, which is why his department put an emphasis on getting the mandatory fraud training done.

"All the Nova Scotia Lands people, the provincial people, with the exception of the NSHA [Nova Scotia Health Authority] people that are on the team, 100 per cent of them have had fraud training," he said Tuesday afternoon.

"And I've had it myself."

As for the criticism last fall that only 11 per cent of his department had completed the training, Hines said that 52 per cent of employees had done it.

The office was also worried about recommendations made by a consultant hired by the province to advise it on the structure that should be in place to oversee the project, as well as the "key project functions essential to the successful delivery of the projects."

The AG's office found the province had only completed seven of 18 recommendations, seven of which were deemed by auditors to be "critical to the success of the projects."

They include:

• Formalize as a project and establish project controls.
• Ensure role/responsibility clarity.
• Appoint experienced individuals to key project roles.
• Enable Department of Health and Wellness's accountability.
• Develop detailed project resource plan.

Pickup told reporters he wasn't surprised by what his office discovered.

"I guess as an auditor general I've learned not to be surprised by anything, but I think you know, disappointed that these things weren't done."

Hines said the lack of progress was justified.

"It's a complex project. There's complex recommendations. It does take some time and we're working towards getting those done."

PC Leader Tim Houston said it was incumbent on the McNeil government to set things right.

"That's a significant project — $2 billion … flowing to a lot of different places.

"There's lots of risk that that money goes somewhere it shouldn't go. There's a significant risk of this [becoming] a $3-billion project."

NDP MLA Susan Leblanc called the AG's findings "deeply concerning."

"It feels like these are very basic things that they're missing, in terms of project management [and] fraud risk management."

The office is looking into, but has not yet reported on, the province's decision to move ahead with these projects using the private-public partnership model.

That report is expected to be released by the AG's office in next spring, although Pickup says his office will only look at how the government reached its decision, not whether it was the best way to go.

In response to the criticism and recommendations brought forward by the office, the Department of Transportation responded: "All the recommendations of the office of the auditor general are accepted and appreciated as we move through the early stages of this multi-year capital project."

In a second audit, Pickup's office was able to conclude the province's efforts to cut red tape were reasonable and fair. Although it did not audit the figures used by the province, it was able to say the formula bureaucrats used to arrive at the numbers were "reasonable".

The provincial government was looking to cut "unnecessary regulatory burden" to business by $25 million and instead exceeded that amount to cut an estimated $34.4 million.