1.1	On 9 December 2003 I released Volume 1 of our 2003 Report. 
At that time I indicated that due to the government’s lateness in closing 
its accounts, we were not able to provide our normal commentary on the 
Province’s financial results. The financial statements of the Province 
have now been issued, and our 2003 Report can now be completed.

1.2	In this volume you will find a chapter dealing with the 
Province’s financial condition, a chapter on the management of 
employee absenteeism, and a chapter on financial audits we have 
completed in departments and Crown agencies. I will provide highlights 
from this work later in this chapter, but first I would like to comment on 
two aspects of the Province’s financial statements: timeliness and 
transparency. 

Timeliness of financial 
statements

1.3	The Public Sector Accounting Board of the Canadian Institute of 
Chartered Accountants (PSAB) sets the accounting and reporting 
standards for governments in Canada. PSAB has identified a number of 
basic qualities that are essential to the usefulness of government 
financial statements. One of these qualities is timeliness. PSAB says 
“Information should be timely. Financial statements issued long after 
the end of the fiscal period are of historical interest only. ... The 
usefulness of information for decision making and assessing 
accountability declines as time elapses.” 

1.4	In Volume 1 I talked about the lateness of this year’s financial 
statements and commented that the taxpayers were still waiting to see 
how their money was spent. I can now report that the audited financial 
statements were issued on 21 November and Volume 1 of the Public 
Accounts was available in hard copy on 25 November 2003, almost 
eight months after the end of the fiscal year. An examination of the past 
ten years indicates that for eight of those years the Province’s financial 
statements were not issued until the 30th of September or later. On six 
occasions the financial statements were issued in November or 
December. This analysis indicates that this year is really no exception; 
the statements have traditionally been released to the Legislature and the 
public well after the end of the year.

1.5	I would like to see an improvement in this area. Such an 
improvement will only happen if the government commits itself to 
releasing the statements by a certain date, say 31 July. I am confident 
that, with such a commitment, government accounting staff and 
ourselves as auditors can work together to meet the target. Our review 
of other provinces indicated that Alberta tabled their 31 March 2003 
Public Accounts on 24 June, British Columbia on 27 June and 
Saskatchewan on 21 July. I see these as good examples of timeliness. 

Transparency

1.6	The transparency of the Province’s financial statements would 
be greatly enhanced if they were accompanied by an easy to read 
discussion and analysis of the financial results, and if the transactions in 
the Fiscal Stabilization Fund were not used as a means of obscuring the 
actual financial results.

Financial statement discussion 
and analysis

1.7	Last year, in chapter 2 of my Report, I pointed out the need for a 
discussion and analysis of financial results so that readers would have a 
“better understanding of government financial statements, and 
government financial condition.” I then explained the type of 
information that could be provided, including financial statement 
highlights, a review of financial risks and uncertainties, an analysis that 
clearly explains the reasons behind major budget to actual variances and 
an assessment of revenue and expenditure trends. Unfortunately, there 
has been no improvement this year in the Province’s explanation of its 
financial results. All that has been provided is a one page news release 
on 21 November and four pages of variance analysis in Volume 1 of the 
Public Accounts. The quality of the variance analysis is unchanged from 
last year when I indicated that “we find some of this information 
unhelpful. It answers the “what” question, but provides little insight into 
“why”.”

1.8	I am raising the issue again this year because I strongly believe 
improvements should be made. It is simply not reasonable to expect 
Members of the Legislative Assembly and the public at large to be able 
to read and understand a complex set of financial statements without any 
additional information and explanations. We do not expect patients to be 
able to read and understand their x-rays. What is needed is a 
professional interpretation of the financial statements in plain and simple 
language. The use of charts, graphs and five or ten-year trend analyses 
would also be helpful. 

1.9	In Volume 1 of the 2003 Public Accounts of Canada are sixteen 
pages of Financial Statements Discussion and Analysis. It is very easy to 
read. It includes a section on highlights and provides a good analysis of 
results by comparing to the budget of the current year and actual results 
of the previous year. It uses 15 charts and graphs to explain significant 
trends and it has a discussion on risks and uncertainties. It also has a 
glossary of terms.

1.10	Last year I concluded my comments on this topic by saying “We 
encourage the government to build on and enhance the information it 
now provides to New Brunswickers, and to issue a comprehensive 
financial report describing its financial condition in clear, concise terms 
that can be easily understood by a reasonably informed reader.” I make 
the same point this year and at the same time suggest the government 
look to the Public Accounts of Canada as an excellent example of how 
this can be done. 

Fiscal Stabilization Fund 
should not be used as a means 
of obscuring the actual 
financial results

1.11	The Province of New Brunswick incurred a deficit of $109.4 
million for the year ended 31 March 2003. The news release 
accompanying the issuance of the audited financial statements stated, 
“Most of the problems in 2002-2003 were outside the direct control of 
the Province, the minister said. He cited a $77.4 million loss of net 
income at NB Power, slumping stock market returns that affected the 
Province's pension plans, and a $33.8 million reduction in federal 
transfer payments in October, which included the negative impact 
related to population based on the 2001 Census.”

1.12	A deficit means that the expenditures for the year were greater 
than the revenues. It also means that there has been an increase in the 
Province’s net debt. For the year in question, the deficit of $109.4 
million resulted in an increase in net debt by a corresponding amount, 
and at 31 March 2003 the Province’s net debt was $6.7 billion. These 
figures are clearly reported on the Province’s audited financial 
statements and they are all key measures of financial performance 
required by PSAB.

1.13	In the same news release, the Minister indicated that “the 
surplus is $1 million for 2002-2003”. This is not the case. 

1.14	Since the creation of a Fiscal Stabilization Fund three years ago, 
the government has wanted to report how it was using the Fund for 
“fiscal policy purposes”. The disclosure has appeared as four lines at 
the bottom of the Statement of Revenue and Expenditure. While I was 
never pleased with the disclosure, I have accepted it because the 
information contained in the four lines was factual and the description 
was clearly labelled “Surplus (Deficit) for fiscal policy purposes”. 
Notwithstanding this I was concerned about transparency. Would the 
Legislative Assembly and the general public appreciate the difference 
between a surplus (or deficit) calculated in accordance with normal 
accounting practices and a surplus (or deficit) for fiscal policy purposes? 
Since the appearance of these four lines I have noted confusion on the 
subject in the Legislative Assembly, at Public Accounts Committee 
meetings, in the media and with the public at large. I raised the issue last 
year in chapter 2 of my annual Report. 

1.15	I am raising the issue again this year because, in my opinion, the 
situation has worsened. For the first two years the government’s press 
release on the financial statements referred to a “surplus for fiscal policy 
purposes.” This year no reference is made to “fiscal policy purposes.” 
On 21 November 2003 the news release from the Department of Finance 
simply stated “the statements show a surplus of $1 million.” This 
statement is wrong. In my opinion it trivializes the value of audited 
financial statements when a news release can convey a message which is 
entirely different from what is disclosed in the statements. While the 
commentary for the first two years certainly did not enhance the concept 
of transparency, the news release this year is misleading. The Province 
did not have a surplus of $1 million; it had a deficit of $109.4 million.

1.16	The government set up the Fiscal Stabilization Fund “to assist in 
stabilizing the fiscal position of the Province of New Brunswick from 
year to year and to improve long-term fiscal planning”. This is set out in 
the legislation which set up the fund. The government should be careful 
in explaining how the fund is being used for these fiscal policy purposes 
and should not be using the fund to obscure its actual financial results.

1.17	I believe the Legislative Assembly and the citizens of New 
Brunswick would benefit from a discipline that delivered more timely 
financial results, included an informative and easy to read financial 
statement discussion and analysis, and avoided any communication that 
introduces confusion concerning the financial results for the year.

Financial indicators

1.18	For the past six years we have been tracking six financial 
indicators which show the Province’s financial condition from the 
perspective of sustainability, flexibility and vulnerability. While the 
Province did incur a deficit in the current year of $109.4 million, which 
increased net debt by a similar amount, the trends over the past ten years 
have for the most part been positive. The results of our work in this area 
can be found in chapter 2.

Absenteeism 
management

1.19	We completed an audit this year in the Office of Human 
Resources (OHR) to determine if the government has systems and 
practices in place to effectively manage employee absenteeism in the 
Civil Service. The cost of absenteeism for this group of employees in 
2001-2002 was reported to be $13,792,038, and the average number of 
employee sick days was 9.58. The total cost of employee absenteeism to 
government would be much greater because the Civil Service, which 
includes 10,400 employees under the Civil Service Act, represents only 
one-third of all government employees. 

1.20	We determined from our work that while the OHR is collecting 
statistics on the number of sick days used and the related costs, there is 
room for improvement in the systems and practices used to manage 
employee absenteeism. We recommended, for instance, that employees 
with supervisory responsibility should be receiving adequate training in 
absenteeism management and the OHR could be doing more to identify 
the risk factors that contribute to abnormally high absenteeism rates. 
Our work in this area can be seen in chapter 3.

1.21	You will notice in chapter 3 that we have presented our work in 
a new reporting format. The format, called Information Mapping, uses a 
set of precisely defined modules so that the information is easy to read 
and understand. Research has shown that Information Mapping 
significantly improves clarity of writing and decreases reading time.

1.22	This is a major change for my Office and we will only continue 
using Information Mapping if our readers find the format improves the 
clarity and readability of the information. In this regard I would like to 
hear from Members of the Legislative Assembly, the media and citizens. 
An assessment form is found inside every hard copy of the Report. One 
is also found on our Office web site at www.gnb.ca/OAG-BVG.

Financial audits in 
departments and 
Crown agencies

1.23	Our Office has a long-range plan to review all key computer 
systems in government. This review is used to support our audit opinion 
on the provincial financial statements. We identified the Human 
Resource Information system in the Office of Human Resources as one 
of these key systems because of the magnitude of dollars processed by 
the system. 

1.24	Our audit reviewed and assessed the adequacy of internal 
controls in the computer environment and the computer application 
which is used to process a regular payroll of approximately $465 million 
per year. Based on our examination, we determined that the computer 
control environment is adequate to support the operation of the system 
and the application controls were such that we were able to rely on them 
in expressing an opinion on the Province’s financial statements. We 
made some recommendations for improvement, and they are found in 
chapter 4.

1.25	I have also included in chapter 4 the results of a review we 
carried out at Service New Brunswick on the service agreements they 
have for the services being delivered on behalf of other government 
departments and agencies.

Acknowledgements

1.26	This Report is the culmination of a lot of hard work by the staff 
in my Office. Once again, I am indebted to their professional advice and 
dedication.



Daryl C. Wilson, FCA

Auditor General