Introductory 
comments

1.1	In this Volume 2 of the 2006 Report, we are reporting on six 
projects; our audit of the Pension Benefits Act; our audit of 
governance at the New Brunswick Investment Management 
Corporation; our audit of the tracking system for wood harvested 
from private woodlots; our audit of the health levy on motor vehicle 
insurers; our review of the 9-1-1 system; and our review of 
New Brunswick’s funding of Community Economic Development 
Agencies. We have also included in this volume our follow-up work 
on some of the recommendations we made in prior years and a 
document we provided to government about strengthening the role of 
the Auditor General.

1.2	In this first chapter, we provide a summary that is intended to 
give the reader an overview of the key information contained in each 
chapter. In preparing this summary, one issue stood out, and that is 
that despite various exercises by government over the years to 
improve the efficiency of government services, there are still 
opportunities for improvement. We believe there are still 
opportunities to examine how government services are delivered and 
implement changes either to improve quality or reduce the cost of 
providing those services.

1.3	During the course of our work, we found examples of missed 
deadlines, tasks that could be eliminated or made more efficient, 
incomplete data and missed revenue or cost savings. We identified 
that legislation in many of the areas we looked at should be 
reviewed.

1.4	We also found highly dedicated civil servants and board 
members who are committed to serving the Province. However the 
government needs to give them the environment they need to provide 
the most value by making legislation efficient, by making 
expectations clear, and by eliminating unnecessary tasks. 

1.5	I want to acknowledge the cooperation that we received from 
government departments and agencies during the course of our work. 
The work of two of our audits included in this volume took us into 
the Department of Justice and Consumer affairs, where we are also 
conducting another value-for-money audit to be reported on in the 
future. The Department has accommodated us despite the demands 
we have placed on them.

1.6	I also want to acknowledge and thank the staff in the Office of 
the Auditor General. This volume is the result of their hard work and 
dedication.

Pension Benefits Act

1.7	In chapter 2 of this volume, we report on our audit of the 
Pension Benefits Act which became the responsibility of the 
Department of Justice and Consumer Affairs in 2006.

1.8	The scope of our audit was limited to the protections offered 
by the Act to active and former pension plan members and the nature 
of the operations of the Office of the Superintendent of Pensions.

1.9	Pension plans in Canada have to be registered with the 
jurisdiction where most of the plans’ members work. About 37% of 
New Brunswick workers are covered by an employer-sponsored 
pension plan, although, because the Pension Benefits Act does not 
apply to certain government-sponsored pension plans, only 16% of 
New Brunswick workers are members of pension plans that are 
subject to the Pension Benefits Act. Pension plans registered in 
New Brunswick include about 59,000 active and former members 
and held assets of approximately $4.1 billion at the end of 2005.

1.10	Pension benefits legislation can be complex; the regulator 
from the jurisdiction of registration must supervise a pension plan 
using the legislation of all the jurisdictions in which plan members 
work.

1.11	Our interpretation of the Pension Benefits Act is that it offers 
protection by ensuring minimum levels of pension benefits are 
offered by all pension plans; by reducing the risk of plan funding 
deficiencies; and by providing dispute resolution mechanisms. The 
Act specifically includes a warning that registration of a pension plan 
is not to be construed as proof that the plan complies with the Act and 
the regulations. 

1.12	We noted that the responsibility of the Office of the 
Superintendent of Pensions was described in annual reports of the 
Department of Training and Employment Development as reviewing, 
registering and monitoring private sector pension plans and 
amendments “…to ensure that plans are sufficiently funded to pay the 
pensions intended for plan members.” This was changed in the 
2004-05 annual report which simply stated that the Office was 
responsible for “…registering private sector pension plans and 
amendments thereto in an effort to reduce the risk of plans being 
under funded.” This change indicated to us that the Department felt it 
had previously overstated the protections offered by the Act to 
members of private pension plans.

1.13	We concluded that the Office of the Superintendent of 
Pensions has not tried to ensure that stakeholders are aware of the 
scope of protections offered by the Act. We found that the Act and 
the regulations are the only documents that describe the protections 
and they are difficult for the average plan member to understand. We 
found that other jurisdictions in Canada have prepared plain language 
explanations of pension rights.

1.14	We found that the Act places the onus of compliance on the 
plan administrator. We think that since in the majority of cases the 
administrator and the sponsoring employer are one in the same, this 
could put the administrator in a conflict of interest when executing 
their fiduciary responsibilities to plan members under the Act.

1.15	We looked at the systems, policies and procedures used by 
the Office of the Superintendent of Pensions. Formal policies do not 
exist and the pension information system and operating procedures 
are not sufficient to appropriately guide the work of the Office.

1.16	We found many errors in the data contained in the pension 
system including fields that are sent to Statistics Canada on an annual 
basis for its publications.

1.17	We found that the Office does ensure compliance with many, 
but not all, requirements of the Act. Specifically we found general 
non-compliance with filing deadlines. For example, administrators 
must file applications for registration within 60 days of establishing a 
plan, however on average over a six year period, these applications 
were 226 days late. We also discovered that 5 defined-benefit plans 
have never filed their triennial actuarial valuation reports and 
97 defined-contribution plans have never filed their triennial cost 
certificates. The Office has not demanded compliance with the 
deadlines, has not performed on-site inspections to investigate 
instances of non-compliance, and has not assessed appropriate late 
filing penalties.

1.18	Compliance with deadlines is important. For example, 
administrators are permitted to implement a plan amendment while 
waiting for the Superintendent to register the amendment. Late filing 
or late registration of an amendment could result in a highly 
undesirable situation if plan members have retired under a plan 
amendment, but the application is later rejected by the 
Superintendent.

1.19	We found that pension plan fee revenue collected by the 
Office was sufficient to cover its operating costs for the period 1995 
until 2001. Since that time, costs have exceeded fees, thus taxpayers 
are subsidizing the administration of private pension plans by about 
$75,000 a year. Fee rates have not changed since they were 
originally introduced in 1991.

1.20	Many recently registered plans have been individual pension 
plans. Plans established for one or two members are created to 
maximize the tax benefits for plan members. There are 65 plans 
registered with the Office of the Superintendent of Pensions that have 
only one plan member. Considering that these plans have the same 
supervision requirements as plans with many members, we see 
administering these plans as an inefficient use of the resources of the 
Office. We found that other jurisdictions have reduced their 
registration requirements or increased their registration fees for 
individual pension plans.

1.21	We were pleased to find that the Office had established 
service guarantees for its work, however because of work backlog, 
the Office has not been monitoring its performance.

1.22	We found that the Office plays an appropriate role in 
addressing significant issues faced by private pension plans. It 
participates in efforts to identify and resolve significant issues faced 
by private pension plans, and advises government of those issues.

1.23	We identified one situation, which is explained in the next 
paragraph, where we believe the Act may not adequately protect the 
interests of former plan members and many active members; 
although such an assessment needs to be made within the framework 
of maintaining what the Supreme Court of Canada called a fair and 
delicate balance between employer and employee interests. 

1.24	The Act provides only limited protection to former members 
with respect to plan amendments. The Superintendent may only 
refuse to register an amendment that would reduce the amount or 
commuted value of a pension benefit or that would cause the plan to 
cease to comply with the Act. If a plan amendment moves a plan 
from a surplus position to a deficit position, that would not be 
sufficient grounds for the Superintendent to refuse the amendment. In 
the end, the decision to amend a plan is a decision of the employer 
regardless of the impact on the funding position of the plan. 

New Brunswick 
Investment 
Management 
Corporation
    
Governance

1.25	In chapter 3 we report on our audit of the New Brunswick 
Investment Management Corporation (NBIMC). NBIMC was created 
by legislation in 1994, and acts as trustee for the three legislated 
provincial pension funds: the Public Service Superannuation Fund; 
the Teachers’ Pension Fund; and the Judges’ Pension Fund. The 
investment assets held by NBIMC for those three funds are currently 
in excess of $8 billion.

1.26	Our audit objective was to assess whether current governance 
structures and processes established for NBIMC set a framework for 
effective governance.

1.27	In 2006, NBIMC received $328 million in contributions to the 
funds; paid out $398 million; earned $1,113 million in investment 
income; incurred $9 million in corporate expenses, and had 36 staff.

1.28	It is the Province that guarantees all future pension 
entitlements of current and former employees under the three 
legislated plans. There is a correlation between the level of 
investment returns earned by NBIMC and the amount of funding that 
must be provided by the Province, therefore all New Brunswickers 
have a stake in the success of NBIMC.

1.29	The Province is the owner of NBIMC. NBIMC is the trustee 
of the pension fund assets, not the owner of the assets.

1.30	The objects and purposes of NBIMC appear in section 4 of 
the NBIMC Act. They are: to act as trustee for the three funds; to 
provide investment counseling services and other services in respect 
of other funds specified in legislation or regulation; to promote the 
development of the financial services industry and capital markets in 
the Province; and to carry out such other activities or duties as may 
be authorized.

1.31	When reviewing these objects and purposes, we made the 
following observations. NBIMC is directly involved in the 
investment of $6.3 billion of pension fund assets and they have 
engaged third-party managers to invest $1.7 billion of pension fund 
assets. NBIMC sets the investment policy for the third party 
managers to follow. NBIMC has not been asked by the Province to 
provide services in respect of any of the other funds specified in 
legislation. We wonder if the creation of the NB Securities 
Commission means that the role of NBIMC in promoting the 
development of capital markets should be clarified.

1.32	The NBIMC strategic plan expired at 31 March 2005 and had 
not been renewed at the time of our audit. The board of NBIMC was 
aware that the strategic plan needed to be renewed, however they 
indicated that had not happened because of uncertainty about the 
reappointment of board members. We believe, despite the concerns 
about board continuity, that a new strategic plan should have been 
developed. Uncertainty on the board does not excuse them from their 
responsibility to provide strategic leadership.

1.33	The board of NBIMC does have by-laws and corporate 
policies that address key board structures and processes, as well as 
the roles and responsibilities of the board.

1.34	The Minister of Finance has never provided NBIMC with a 
written explanation of the role of the Deputy Minister of Finance as a 
non-voting NBIMC board member, and that role is not documented 
in the NBIMC directors’ manual. We found more than one board 
member confused about this non-voting role. Upon reviewing 
historical information we found evidence that the role was to ensure 
that the Minister of Finance was aware of any issues that might arise 
but not to act as formal communication between the Province and 
NBIMC. The role is non-voting to ensure there is not any conflict of 
interest between the role as an NBIMC board member and the role as 
Deputy Minister of Finance. 

1.35	The Chief Executive Officer (CEO) of NBIMC is a voting 
member of the NBIMC board. We believe that governance best 
practices discourage the appointment of a corporate CEO to the 
governing board of the corporation. We did find evidence that 
in-camera board sessions without the CEO present are held regularly.

1.36	Some members of the board are also members of the pension 
plans for which NBIMC acts as trustee. We found that the roles and 
responsibilities of these board members as fiduciaries have been 
documented in the NBIMC directors’ manual.

1.37	NBIMC’s committee structure is generally consistent with 
best practices, although we believe the board should also create a 
nominating committee.

1.38	NBIMC does have a management succession plan in place.

1.39	The Province is the guarantor of the pension entitlements, and 
the Minister of Finance is the governor of each of the three legislated 
pension plans. NBIMC’s primary function is fiduciary. At present, 
the Minister of Finance does not provide any performance 
expectations to NBIMC. There is no letter of expectations, or other 
formal process for communicating performance expectations to 
NBIMC. Because the Minister of Finance does not formally 
communicate provincial expectations to NBIMC, the corporation 
uses other available sources of information in setting investment 
policies.

1.40	One specific area where we feel the Province needs to clarify 
its expectations is the requirement under the NBIMC Act that the 
corporation has to “…have regard to investment opportunities in the 
Province” when developing and implementing “…statements of 
investment policies and guidelines…”.

1.41	We believe that a single letter of provincial expectations 
should be prepared to clarify roles, responsibilities and expectations 
and to allow for better performance evaluation.

1.42	The process for making appointments to the board is not 
documented. Board members expressed concern about the way 
appointments are being made to the board of NBIMC, and about the 
fact that the board does not have input into the appointment process.

1.43	The timeliness of board appointments at NBIMC has become 
a serious concern recently. During March 2006 four long-serving 
board members were replaced with four new members. The terms of 
five other members expired on 15 June 2006, although four of them 
were reappointed on 20 July 2006 for terms of eighteen months each. 
The appointment situation has caused uncertainty for both the board 
and corporate staff, causing risk that both governance and 
management effectiveness could be compromised.

1.44	A serious situation was ongoing at the time of our audit field 
work. Between 15 June and 20 July 2006 the board did not have the 
membership needed to have a quorum. During that period it was 
unable to hold board meetings.

1.45	Board members indicated that they would like to have a 
formal board succession plan to allow for transfer of corporate 
memory and to lessen staff uncertainty around future corporate 
direction.

1.46	NBIMC provides training to board members. We made some 
recommendations about improving the training and development 
plan.

1.47	Reputation risk is taken very seriously at NBIMC. The 
corporation has a code of ethics and business conduct covering its 
directors and employees. We made some suggestions for items that 
should be included in that code.

1.48	The NBIMC Act has not been subject to a comprehensive 
review since it was originally passed in 1994. We believe that the Act 
should be reviewed to assess whether it continues to be relevant, its 
stated purposes are still relevant and it provides an effective 
framework within which identified purposes can be achieved.

Department of 
Natural Resources
    
Wood tracking system

1.49	In chapter 4 we report on our audit in the Department of 
Natural Resources of the tracking system for wood harvested from 
private woodlots in New Brunswick. Every primary forest product 
transported in New Brunswick must be tracked through a 
transportation certificate system. This is the case whether the 
products originated on Crown land, industrial freehold lands, or 
private woodlots. We limited the scope of our audit to the tracking 
system for wood harvested on private woodlots.

1.50	28% of wood harvested in New Brunswick comes from 
private woodlots. 21% of wood consumed by mills in the Province 
comes from private New Brunswick woodlots. Originally, the 
Department of Natural Resources hoped that the tracking system for 
private woodlot harvests would “…provide a more accurate 
determination of the harvest level” and “…provide a deterrent to 
wood theft.” 

1.51	We noted two other benefits that have come from the tracking 
system for private woodlots. The system has assisted the forest 
products marketing boards in collecting levies on wood sales, and it 
has provided a method to document the source of supply as required 
under forest management certification standards.

1.52	The Department needs to track wood harvested from private 
woodlots in order to help it manage the issue of source of supply of 
timber for wood processing.

1.53	An inspection of trucks indicated that 98% of all shipments of 
primary forest products are documented, and 90% of the 
documentation is properly completed, although these inspections 
were not able to determine if the right form of documentation was 
being used. Also, the wood tracking system is capturing 95% of 
New Brunswick harvested wood sent to New Brunswick mills.

1.54	When we compared private harvest volumes from industry 
sources to volumes captured by the wood tracking system, we found 
that out of 3.1 million cubic meters of roundwood harvested from 
private woodlots in 2003-2004, only 2.5 million were properly 
tracked. The remaining 600,000 cubic meters were unaccounted for 
and this was mostly wood exported from the Province. To determine 
the approximate amount of private wood exported we had to look at 
data from the Maine Forest Service, the largest importer of New 
Brunswick wood.

1.55	So, the main area of incomplete harvest volumes is wood 
harvested from private woodlots that is being exported, which is 20% 
of the private woodlot harvest. The wood tracking system is only 
accounting for 25% of these exports.

1.56	We noted that while transportation certificates are being 
completed for export shipments, truckers do not always remit the 
certificates and scale slips to the marketing boards as required. 
Furthermore, little action has been taken to enforce remittance. 
Without the scale slip, the precise volume of wood exported from the 
Province is not known.

1.57	At this point, one might question why the wood tracking 
system is in place at all. It captures 95% of the in-Province market, 
but 100% is captured through industry reporting on the timber 
utilization survey. It captures 25% of the export market, but a more 
accurate number can be determined from the Wood Processor Report 
prepared by the State of Maine. If harvest volumes are available from 
those sources, they would seem to be a simpler way to determine the 
harvest level than a load tracking system. In fact, neither Nova Scotia 
nor Quebec require individual load tracking slips.

1.58	With regard to the system’s other stated intended benefit, to 
provide a deterrent to wood theft, we were unable to conclude 
whether rates of theft from private woodlots have decreased 
following the introduction of the transportation certificates. We were 
however able to conclude that the certificates have been used as a tool 
in the prosecution of wood theft.

1.59	The tracking system has some weaknesses at the 
administrative level; the pre-printed tracking slips are not accounted 
for, the slips are not always capturing the correct identification 
number for the source property, and the Forest Products Commission 
is not fulfilling its responsibility to audit the wood tracking system. 
Having effective control procedures is important because the value of 
the information produced by the wood tracking system is dependent 
upon a complete accounting of the transportation certificates.

1.60	Another significant weakness in the system is that the 
incomplete harvest volume data that the system collects is compared 
by the Department to an allowable annual cut number that was set in 
1992 and is out of date. The reason it has not been updated is that the 
Department has not reached consensus with the marketing boards on 
new numbers. But monitoring sustainability is the Department’s 
responsibility, so while they are waiting to agree on new allowable 
annual cut numbers, they should make their own estimate of a 
sustainable cut which would be a better benchmark than an estimate 
that is out of date.

1.61	But the system does have value. One reason why the tracking 
slip system should be continued is that the marketplace is starting to 
demand that wood products be harvested from environmentally 
sustainable forests. For example, one mill in Maine requires the 
property identification number of the woodlot or the landowner’s 
name at the time of delivery; this lets them prove the chain of custody 
of the forest products. The Province’s system captures this 
information.

1.62	Also, six of the marketing boards said that the tracking 
system had helped them to increase the collection of levies they 
impose on sales of private woodlot harvests. However, they felt the 
cost of administering the system exceeded the extra revenue.

1.63	If the system is to be retained it should be improved so it 
works as designed.

1.64	Reviewing the levies revealed two factors. First, if export 
volumes are not being reported to the marketing boards, levies are 
probably not being paid on those exports. The value of unpaid levies 
could be as high as $1.1 million. $438,000 of that estimate is for 
forest management levies which are supposed to go back into 
silviculture programs for the private woodlots, and $644,000 is for 
administration levies. 

1.65	The second factor is that some wood brokers argue that they 
should not have to pay the administration levy to the marketing 
boards that the brokers see as competitors.

1.66	The department does have an enforcement program in place, 
using roadside and mill inspections, which has led to prosecutions for 
violations, although that program could be improved. For example, 
the wood tracking system in conjunction with enforcement 
procedures could be an effective tool in exposing wood theft if the 
roadside inspection program verified that the wood was harvested 
from the woodlot specified on the transportation certificate.

Departments of 
Health and Justice 
and Consumer 
Affairs
    
Health levy

1.67	In chapter 5 we report on our audit of the health levy in the 
Departments of Health and Justice and Consumer affairs. The health 
levy was first put in place in 1993. It is intended to recover certain 
specified costs incurred by the Province for the managing of personal 
injuries from motor vehicle accidents. It is charged to motor vehicle 
insurers in the Province based on the value of motor vehicle 
insurance premiums they bill.

1.68	The health levy generates a significant amount of revenue for 
the Province. We wanted to find out what its purpose was, how it 
worked and what, if any, relationship it had to the Province’s 
Insurance Premium Tax.

1.69	Most health services are paid for from general revenue, but 
the cost of motor vehicle accidents has, for some time, been an 
exception.

1.70	At one time, the approach was to recover the costs through 
the legal system. The Department of Health had to attach a legal 
claim for cost recovery to the legal claim being made by the person 
injured in the accident. In 1990, the Province recovered $3.0 million 
this way, although it cost them 10% of that to do so.

1.71	Now, in theory at least, the cost is levied on insurance 
companies. It is a cost to them of providing motor vehicle insurance, 
and would be one factor they consider when setting vehicle insurance 
premiums.

1.72	But the health levy on insurance companies is not the same 
thing as Insurance Premium Tax on insurance companies. They are 
two different revenue sources for the Province.

1.73	Both the departments of Health and Justice and Consumer 
Affairs are involved in the process of determining, charging and 
collecting the health levy. In the early 1990s, a consultant developed 
a complex model to put a value on the costs to the provincial system 
caused by motor vehicle accidents. Because of the uncertainty in the 
available data, many estimates had to be used. A method to estimate 
the health levy for future years was also established.

1.74	We analyzed the way the Department of Health has set the 
health levy every year, and our best estimate is that the health levy 
doesn’t collect enough to cover the health care costs of vehicle 
accidents. In fact, we believe the levy is only enough to cover 70% of 
the public health care costs of vehicle accidents. The other 30% is 
paid for by general revenue.

1.75	This is a significant amount of money; the budgeted revenue 
from the health levy for the 2006-2007 year is $16.9 million.

1.76	However, we are not recommending that the Province fix its 
method of calculating the levy and charge more to the insurance 
companies. We believe that the method of determining the amount of 
the levy and the process for collecting the levy are both more 
complicated than is necessary. Furthermore, the levy is confusing to 
the public who may or may not know it exists, but who probably 
don’t know the affect it has on their insurance premiums. In fact, it is 
not possible to know for sure the affect it has on any individual 
insurance premium billed by an insurance company.

1.77	The Province should look for an easier, more transparent way 
to generate the same amount of revenue it is generating through the 
health levy, and replace the levy.

1.78	However, if the government decides to keep the health levy, 
they should improve the process to simplify it. We have made 
recommendations about recalculating the costs, making changes to 
the legislation and completing reconciliations that would improve the 
administrative aspects of the health levy process.

Department of Public 
Safety
    
9-1-1 service

1.79	In chapter 6 we report on our project in the Department of 
Public Safety on New Brunswick’s Emergency 9-1-1 Service. Based 
on findings from our preliminary review of the service, we decided 
not to do an audit, however we did gather information about the 
service and identified some challenges faced by the service. One 
significant reason for our decision was that a comprehensive internal 
review of the 9-1-1 service and dispatch systems was completed in 
October 2004, and we found evidence that the Department was 
actively implementing the improvements recommended by that 
review.

1.80	The Department reports that approximately 150,000 calls are 
made annually to 9-1-1. 43% of these are non-emergency calls. 
26% of the calls primarily require the police, 23% primarily require 
ambulance services, 4% primarily require fire services and 4% relate 
to poison control. There are six Public Safety Answering Points 
(PSAP) across the Province. 26% of the calls are in the Codiac 
region, 24% in Saint John, 21% in Fredericton, 16% in Bathurst, 
7% in Edmundston and 6% in Miramichi. Approximately 34% of 
calls come from cellular phones.

1.81	New Brunswickers pay for the 9-1-1 service via fees on their 
monthly telephone bills. The NB 9-1-1 emergency service charge is 
currently 29 cents a month for a landline and 25 to 50 cents a month 
for cell phones. This fee is used to fund telephone infrastructure costs 
and none of it is remitted to the Province. In addition, there is an 
“NB 9-1-1 Service Fund” that is provincially regulated. The purpose 
of the fee charged to build this fund is to finance the 9-1-1 service 
and the required improvements. The fee is 53 cents for each outgoing 
capable telephone line.

1.82	As a result of its internal review, the Department had 
announced improvements to the 9-1-1 service that included 
developing and implementing standards for service delivery and 
training of staff in the PSAPs; developing quality assurance methods 
for the service; enhancing technology; educating the public on the 
proper use of 9-1-1; assigning call-taking responsibilities regionally 
to the six PSAPs and replacing RCMP J Division’s call taking 
responsibilities; and developing and implementing regional fire 
dispatch and improvements so that fire services can communicate 
with each other.

1.83	When we reviewed the information generated during the 
internal review, we saw documentation indicating that a report would 
be prepared in November 2003, and we saw evidence of significant 
work towards producing a report. We also saw a draft report dated 
December 2003 that appeared almost complete. It was 
comprehensive, well written and organized. It contained comments 
from various stakeholders. It contained both challenges and 
recommendations. The Department informed us that a final report on 
the internal review was not prepared. Rather they took the 
information, summarized the findings into five issues and proposed 
enhancements, and presented them to Executive Council.

1.84	We feel that governance of the 9-1-1 system could be 
improved through the establishment of a cross-functional, 
cross-jurisdictional governance committee to provide strategic 
direction.

1.85	During the course of our review, we observed many positive 
features in the NB 9-1-1 service. The service compares well to other 
Canadian jurisdictions; audits of 9-1-1 were conducted between 1998 
and 2004; and the Department is actively enhancing the NB 9-1-1 
service as a result of different reviews of the service.

1.86	Some areas where we think improvements could be made 
include ensuring the Department has the legal authority to regionalize 
fire dispatch; establishing an enforcement policy to deal with 
situations when PSAPs do not comply with operating procedures; 
continuing the regular operational audits of the PSAPs; formalizing 
an audit plan for the new NB 9-1-1 Service Fund; and securing a 
legal agreement for the 9-1-1 infrastructure to replace the expired 
agreement.

Department of 
Business New 
Brunswick
   
Community Economic 
Development 
Agencies

1.87	In chapter 7 we report on our project in the Department of 
Business New Brunswick (BNB) looking at Community Economic 
Development Agencies (CEDAs). Based on the information we 
gathered during our preliminary review of CEDAs we decided not to 
conduct an audit, however we did make some observations.

1.88	CEDAs are not-for-profit corporations created to work with 
the regional business community in areas of strategic importance to 
the funding partners. There are fifteen CEDAs in New Brunswick. 
CEDAs do not provide funding to businesses, instead they provide a 
number of programs and services to assist organizations. CEDA 
boards range from 11 to 20 members, and staff complements range 
from 4 to 14.

1.89	CEDAs receive core funding from the Atlantic Canada 
Opportunities Agency, Business New Brunswick, and participating 
municipalities. They also have other sources of revenue. While the 
core funding from municipalities varies significantly, from 2% to 
62% of core funding in 2004/2005, the federal and provincial core 
funding to all CEDAs is provided in a 70 to 30 ratio. Our analysis 
shows that BNB provided 21% of the total core funding for all 
CEDAs, a total of $1.2 million. The CEDAs also received an 
additional $3.7 million in provincial non-core funding from various 
departments during the fiscal year ended 31 March 2005. 

1.90	In preparing our analysis we identified that CEDAs do not 
follow a consistent financial reporting format, which made 
comparison difficult.

1.91	CEDAs are accountable to their funding partners. A 
framework document established the guidelines and principles that 
govern the CEDA concept. The reporting requirements of CEDAs 
are set out in these guidelines. BNB annual funding to CEDAs is 
provided in two amounts. 50% of the funding is provided with the 
submission of the CEDAs workplan, and the other 50% is provided 
once a six-month progress report is submitted.

1.92	We reviewed the six-month progress report submitted by 
three CEDAs and found that they identified planned actions, who was 
responsible for the planned actions, and the results at the mid-year 
point.

1.93	All CEDAs prepare an annual report, although we identified 
some weaknesses in them, and we recommended that the Department 
work with its partners to establish a standard annual reporting 
format.

1.94	We found that BNB had complete reporting documentation on 
file for only six of the fifteen CEDAs. We were able to obtain 
missing documents from the CEDAs themselves, indicating that it 
does exist.

1.95	Part of the non-core provincial funding to CEDAs was 
provided from the Community Economic Development Fund at BNB. 
We found that the granting process was working as intended. We 
noted that the application process included a section to document the 
expected outcomes of the project, and recommended that this 
information should be compared to actual outcomes to assess the 
success of the project.

Strengthening the role 
of the Auditor 
General

1.96	In chapter 8 of this report, we provide some suggestions for 
strengthening the role of the Auditor General. We provided this 
analysis to government after the release of the government’s 
Response to the Final Report and Recommendations of the 
Commission on Legislative Democracy, which referred to the 
government’s intention to strengthen the authority of the Auditor 
General to examine important issues of public management.

1.97	We recognize that a new government means that the position 
on the Response to the Final Report and Recommendations may 
change, however we believe our suggestions are still valid.

1.98	While we have received acknowledgement from the 
government that these suggestions have been received, no further 
action has been initiated.

1.99	In this chapter we discuss: having a legislative oversight 
committee for our work; playing a role in strengthening financial 
guidelines; providing input on improving governance practices; 
updating the Auditor General Act; external reviews when government 
changes; forming an audit committee; attendance at audit committee 
meetings of Crown corporations; accepting audit appointments; audit 
of grant payments; and accessing budget revenue for large or 
complex audits.

1.100	The issue of accepting audit appointments was also addressed 
in chapter 1 of Volume 1 of the 2006 Report of the Auditor General 
under the heading “Reducing the other audits we do” where we said:

One way to offset the increased audit effort would be to 
reduce the number of organizations audited. Some of the 
organizations that we audit are small, and the government 
has access to the information it needs to hold them 
accountable even without an audit.

1.101	We believe that some of the financial audits we are required 
by legislation to do are not adding any value, and those organizations 
should not be required to produce audited financial statements.

1.102	We also state in this chapter that instituting changes to 
strengthen the authority of the Auditor General is only one way to 
enhance accountability. The government should also look at other 
ways to strengthen the management of the resources entrusted to the 
government. For example, the work done by CCAF-FCVI Inc. 
concerning Public Accounts Committees is a source of good 
information to improve the effectiveness of Public Accounts 
Committees. Also, strengthening the internal control and internal 
audit roles of government is at least as important as strengthening the 
role of the Auditor General.

Follow up on prior 
years’ 
recommendations

1.103	In chapter 9 we report on our follow-up of recommendations 
we made in previous years. In this Report we are tracking progress 
on recommendations we made in 2002, 2003 and 2004.

1.104	To prepare this chapter, we request written updates on 
progress from the respective departments and agencies. We review 
these updates by meeting with appropriate officials. In some cases we 
request additional documentation to test the accuracy of the accounts 
we have been given.

1.105	Departments and agencies had implemented 170 or 43% of 
our 392 recommendations from 2002, 2003 and 2004. Of the 222 
recommendations not yet fully implemented, 54 are from 2002. 

1.106	In our 2005 Report, we said that the failure of the Province to 
award tenders for cellular service plans and long distance on a timely 
basis meant the Province had paid hundreds of thousands of dollars in 
unnecessary charges. Now that awards have been made, although 
contracts have not been signed, we are able to estimate that delaying 
the awards cost the Province at least $2 million in savings on the 
cellular phone portion of the telecommunications contract. It is also 
possible that savings in the other components of the 
telecommunications contract were foregone. We have not done any 
work to verify whether the Province achieved the lowest possible 
rates in either the cellular phone component or the full telecom 
services package.

1.107	In 2002 we made 40 recommendations to the Department of 
Transportation as a result of our audit of the Vehicle Management 
Agency (VMA). The Department chose not to implement some of our 
recommendations that were intended to enhance the value provided 
by VMA. Instead of implementing our recommendation that VMA 
comply with the Board of Management policy requiring VMA to 
report the cost per kilometer of operating the government fleet and 
comparative costs of alternate means of providing transportation, the 
Department had the Board of Management revise the policy, 
removing the requirement for cost comparisons. The Department also 
rejected another recommendation we made about revisiting its 
balanced scorecard to ensure it includes established industry 
benchmarks for its performance indicators.

1.108	We found this reluctance to make, and publicly report on, 
these cost comparisons surprising, especially since the Department 
was able to provide us with a spreadsheet that showed by their 
calculation that in about 90% of the cases, the average VMA cost of 
central repairs was cheaper than the private sector. We did not audit 
the information in this spreadsheet and so we cannot conclude on 
whether the Department’s assessment is accurate. However, if it is 
accurate we would think the Department would want to report those 
types of results publicly. We continue to believe it is important for 
government to assess and report publicly on the cost efficiency of the 
VMA.



Michael Ferguson, CA
Auditor General